Whose fault is the oil spill?

Ethics @ work: Possible reasons for the Gulf disaster.

May 22, 2010 05:33
4 minute read.
Whose fault is the oil spill?

asher meir 88. (photo credit: )

The ongoing massive oil spill at the British Petroleum Deepwater Horizon oil platform in the Gulf of Mexico is preoccupying business-ethics specialists and is sure to occupy them from years to come. What, if anything, went wrong there, and what are the lessons for the future?

The facts are as follows: A few months ago, drilling began at the site. The well is located deep underwater and is drilled under the seabed. The plan was to drill and then cap the well for future development. But just over a month ago, a huge explosion blew open the well and prevented the cap from being installed. Since then, huge amounts of oil have been billowing out of the well – thousands, or perhaps even tens of thousands, of barrels every day. The oil is nearly certain to cause huge economic and environmental damage, harming wildlife, fisheries and tourism.

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How did it happen? There are three possibilities:

• Bad luck: The best available information and technology were used in the best possible way; there was merely bad luck. Doing things the best way involves prudence and minimizing risks, but it doesn’t mean taking zero risks. The total cost of preventing accidents like this would be greater than the economic and environmental cost of an occasional large spill. If this is the case, nothing was done wrong and the lessons to be learned are mainly technical, introducing new practices to reflect new knowledge gleaned from studying this accident.

• Bad regulation: British Petroleum acted skillfully in its own best interest, balancing the total costs of potential litigation, fines and loss of goodwill against the cost of greater prudence and spill avoidance. The regulations are on the whole sensible. Yet ultimately the costs to BP don’t reflect the true costs. Perhaps BP will go bankrupt and never pay the judgment imposed on it, or perhaps it will only pay for economic damage but not environmental damage, since the herons cannot sue BP in any court.
In this case, the main culprit is poor regulation; if regulations are prima facie reasonable, then I don’t think corporations have a large responsibility to go beyond the letter of the law.

• Bad ethics: If BP acted to try and circumvent regulations, to recklessly ignore regulations, to lobby for inadequate regulation, or to take advantage of loopholes in regulation, then there is a failure of ethics. I believe corporations may ethically leave complex cost and benefit calculations to the voter, but this has certain conditions. It means that they must not try to intervene in the voter’s sovereignty and that they must respect the letter and spirit of whatever legislation is passed.

It also is limited to areas in which voters – that is, regulators – have adequate knowledge and opportunity to make such an evaluation. In areas where regulation is undeveloped, business people have an augmented ethical responsibility to regulate themselves.

It is premature to make a final judgment at this stage. However, there is evidence for all three approaches.

There is a possibility that the event was a real surprise, as there seems to be no precedent for an accident of this type and magnitude and no definitive cause has yet been found. A group of BP executives were actually aboard the rig at the time of the accident, making it quite unlikely that they were hiding information about the rig’s risk.
There is also evidence for bad regulation. Backup systems required by US regulations are reported to be weaker than those required by other countries. That doesn’t automatically indicate that the US errs on the side of laxity, because these systems cost money and the possibility exists that they are not worth the cost.

But news reports give a cost of about $500,000 for these measures, which seems a very small amount to give you a better chance of preventing a catastrophic spill like this. Even if there were no damage whatsoever, the spilled oil is worth tens of millions of dollars by itself.

The company was given exemption from many normal requirements of an environmental impact statement. Nobody knows if the research involved in preparing such a statement would have disclosed the risks that led to the debacle. But again, the costs are so astronomical that it does sound imprudent.

There is evidence for bad ethics, too. For one thing, BP itself lobbied for the exemption. Again, the possibility exists that their best judgment was that the statement was superfluous. But this kind of intervention in the regulation process entails certain ethical obligations.

Another issue is hat BP has been providing the lowest estimates on the extent of the spill. Subsequent measurements may prove them to have been correct. But as of now, there is some evidence to suggest they are trying to minimize their responsibility.

There can be no question that the Deepwater Horizon spill is a terrible disaster. In the coming weeks and months we will be wiser on what technical, legal and ethical measures we need to institute to help prevent additional disasters of this type and scope.

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Asher Meir is research director at the Business Ethics Center of Jerusalem, an independent institute in the Jerusalem College of Technology (Machon Lev).

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