By Sumi Vora (PO ‘25)
At the beginning of October, an underwater oil pipeline off the coast of Huntington Beach in Southern California ruptured, spewing 144,000 gallons of oil into the Pacific Ocean. As horrified Californians watched the toxic, viscous, oil cling to beaches and turn the sea black, many were left wondering: “Why is this still happening?”
California had its first major oil spill in 1969 when an oil pipeline off the coast of Santa Barbara poured over four million gallons of oil into the ocean, forever leaving its footprint on marine habitats, beaches, and wildlife. The 1969 spill sparked major environmental action in the United States. It motivated the Clean Air, Clean Water, and Endangered Species Acts, among other important environmental legislation. Moreover, since 1984, the state of California has refused to approve new oil leases off the California coast, both in state and federal waters.
But almost 40 years later, oil rigs continue to operate. The Outer Continental Shelf Lands Act (OCSLA) of 1953 allows offshore drilling leases to remain active for as long as drilling operations continue. As a result, California produces over 155 million gallons of oil each year, contributing $148 billion to the state’s GDP and generating 1.7 million jobs in California alone. Recently, oil prices have surged to their highest level since 2014 as the economy approaches pandemic recovery, bolstering the industry’s profit margins.
However, the economic benefits of oil production are nothing compared to its costs. Southern California’s wetlands are home to between 85 and 90 species of birds, and several more will stop by during this month’s major bird migrations. Approximately 10% of these species are endangered or threatened, including the western snowy plover, who have been nesting in large numbers around the Huntington Beach area. The impacts of the spill will last decades. A study following the 2010 Deepwater Horizon oil spill reveals that the region’s diverse ecosystems, including endangered species, are likely to suffer extreme ecological damage for at least two years. But as biologist Steve Murawski points out, the area will also experience permanent damage. Even after several beach cleanups, the oil deposited in deeper layers of the marsh’s sediments will be there “pretty much forever.”
Southern California Plovers – Image via Audubon California
Oil extraction harms humans, too. Over two million people, primarily people of color, live within half a mile of an active oil or gas well. As Representative Nanette Diaz Barragán (D-CA) articulates, “oil wells are literally in between homes and right next to schools.” Preterm birth, lung issues, and cancer are all linked to living in proximity to oil extraction sites. In fact, climate scientist Drew Shindell finds that if we were to transition away from fossil fuels, the “lives saved, hospital visits avoided, and workdays not lost” would amount to $700 billion per year.
There are also direct economic impacts. California’s coastal economy, which includes tourism, surfing, and fishing, generates $54 billion in economic activity and employs 654,000 people. Amidst beach closures due to the oil spill, these industries are taking massive hits. Investors are also wary of the oil spills, making it even harder for California’s coastal industries to grow.
Given the fossil fuel industry’s immense harms to the environment, human health, and the economy, complete divestment is tempting. A recent analysis from Oxford shows that a faster transition away from fossil fuels is “likely to be substantially cheaper” than a gradual one, suggesting that there is no better time to divest than right now. Indeed, long-term investors are moving away from the fossil fuel sector: institutions including Harvard and the MacArthur Foundation (among others) have divested nearly $15 trillion worth of portfolios and endowments away from the fossil fuel industry. More divestment announcements will happen on October 26th in anticipation of the 2021 Glasgow Climate Summit.
However, divestment also has some serious consequences. Given the uncertainty in the fossil fuel industry, fossil fuel companies are reluctant to invest in maintaining oil pipelines. But in the meantime, oil rigs are still producing oil. Along with the temporary boom in the industry, high costs of decommissioning incentivize oil companies to remain operational. A 2020 report by the US Bureau of Safety and Environmental Enforcement finds that it would cost over $1.6 billion to decommission the 23 oil extraction platforms in federal waters. Elly, the platform on which the most recent spill occurred, will cost $34.4 million to decommission. Oil companies are responsible for covering the majority of decommissioning costs. Therefore, they benefit from remaining in operation using antiquated infrastructure.
The problem is that failing to upgrade pipelines will lead to more oil spills. As Juan Velasco from the National Oceanic and Atmospheric Administration explains, “there is a clear link between the aging infrastructure and spill frequency.” In 2020 alone, we have seen over a dozen oil spills in the Pacific Ocean. Even abandoned and capped wells will leak more often as they get older.
Oil spills’ harms to the public are amplified because companies rarely take responsibility for the spills. In 2010, BP used loopholes in the tax code to offload nearly $10 billion of the Deepwater Horizon spill’s cleanup and compensation costs onto taxpayers, adding to the $3.8 billion in social costs (repairing infrastructure, lost consumer value of goods, natural resource damages, and litigation costs, etc.) that the public already shoulders.
Environmental policy also plays a role in disincentivizing corporate accountability. The Oil Pollution Act (OPA) of 1990 created a trust fund financed by taxes on oil to clean up spills when the responsible party is unable or unwilling to do so. After the 2015 Refugio Spill, for example, the state of California assumed the majority of cleanup and decommissioning costs. Venoco, Inc., the company that owned the platform, simply abandoned the rig and declared bankruptcy. The pattern of declaring bankruptcy and quickly re-emerging is not uncommon in the oil industry. Amplify Energy Corp., the owners of the Elly platform involved in the recent spill, is another small oil company prone to mismanagement. Just four years ago, Amplify Energy Corp. declared bankruptcy after falling into $1.3 billion in debt, but emerged a few months later after restructuring. Therefore, much like Refugio, it is likely that the government (and indirectly taxpayers) will finance most of the cleanup costs from this spill. And while important acts like the OPA mitigate environmental damage from oil spills, they allow oil companies to escape responsibility for spills, further disincentivizing them from updating their infrastructure. It’s a self-fulfilling prophecy that will continue to multiply the rate of oil spills in the coming years.
All of this means that we need to rethink public policy surrounding the climate crisis. Biden’s Build Back Better Act will give $300 billion in tax incentives to investors in nuclear, solar, and wind energy. It will also impose stricter regulations on the fossil fuel industry. If the bill passes, investors will run farther away from the fossil fuel industry, contributing even more to aging fossil fuel infrastructure and predicating more oil spills in the long run. There are certainly creative ideas to ameliorate the issue of divestment. Daniel Kammen, a researcher at the University of California, Berkeley, suggests reallocating pipes to transport greener fuels like hydrogen and using monitoring technology to detect leaks faster. Legislators also need to adjust corporate tax codes so large oil companies can’t sidestep financial responsibility for the spills. But with the Biden Administration rushing to pass the act before the upcoming Climate Summit in Glasgow, policymakers are making compromises left and right (the $500 billion compromise is a fraction of the original $3.5 trillion act), and it is unlikely that these more controversial elements will make it onto the final bill.
