We Have Yet to Come Face to Face with the Biggest Cost of the BP Spill

We're almost at the happily-ever-after stage of the gulf oil-spill story. The well has been killed, the beaches are being scrubbed and wicked Tony Hayward has been banished to Russia. All that's left now is for BP to make good on the damage it has caused. The company has set aside $32 billion to meet its liabilities, while doing everything in its power to keep the damages below that figure. But even if it has to pay the full price, it will have won one of the biggest bargains in corporate history. BP's true debt is far higher than any of the figures that have been floated to date. The biggest costs to the gulf have yet to be seen.

It was clear early on that BP was as committed to engineering the public perception of the spill as it was to cleaning it up. Soon after launching its clean-up operation, BP banned photographers from taking aerial shots of the slick, citing "safety precautions." Similar methods continue to be used to prevent media access to key sites, and in its own press releases, BP has doctored photos to make its clean-up efforts appear more strenuous.

In addition to making sure the slick was under-recorded, the company worked hard to make sure there was less of it to be seen. Besides the prison laborers who mopped up the oil at a discount on shore, at sea, over 1.8 million gallons of Corexit dispersants were used to make the oil vanish from sight. Such dispersants are banned by the Environmental Protection Agency, but the Coast Guard issued exemptions some seventy-four times in forty-eight days. It worked: BP's principal problem has, literally, disappeared. "I don't think we'll see any more oil going into the beaches," BP's avuncular new CEO, Bob Dudley, announced upon taking over. "… And where there is no oil on the beaches, you probably don't need people walking up and down in hazmat suits." In other words: if the oil cannot be seen, the danger has passed.

Sadly, "if you can't see it, it's not there" isn't sound environmental science. Oil enters the food system far more rapidly as an invisible emulsion than as a rainbow slick. Scientists have already discovered the spill's signature inside crab larvae, though the consequences of mixing oil and dispersant with the gulf ecology is uncertain, and won't be fully known for generations. By introducing Corexit into the gulf, BP not only hid its mess, but sowed doubt over the full extent and effects of the damage. This ignorance is no accident—for BP, it's bliss. It makes it possible for BP to argue that it cannot be held accountable for those damages that were not directly related to the spill.

Indeed, Dudley would be a poor CEO were he not to use the lingering questions over the exact amount of damage caused by his company to haggle every possible concession from the government. The federal government's (hotly debated) estimate of the total spill volume amounts to 4.9 million barrels, of which 800,000 barrels were recovered. If a federal court rules that the spill resulted from gross negligence, the government can claim civil penalties of as much as $4,300 per barrel, leaving BP vulnerable to a total fine of up to $21 billion. Although he is unlikely to bargain down BP's liability to match the flow rate BP initially claimed was gushing from the well (1,000 barrels a day), BP has excelled in such negotiations in the past. According to the Center for Public Integrity, in October 2008, BP whittled seventeen serious charges of safety violations at its Tesoro refinery in Anacortes, Washington down to three counts, slashing a $85,700 fine to $12,250.

That said, even if the government goes easy on BP, as it already appears to be doing, there are other constituencies ready to make claims. One report calculates the economic cost to be $1.2 billion and 17,000 jobs by the year's end. Some figures are even higher—the US Travel Association commissioned a back-of-envelope study from Oxford Economics, which estimated the losses to tourism alone at $22.7 billion over the next three years. In response, BP is trying to minimize, avoid and obfuscate, settling with claimants for as-yet-undisclosed lump sums in exchange for waiving the right to sue BP, and buying in scientists from Louisiana State University, the University of Southern Mississippi and Texas A&M at $250 an hour for its legal defense teams. After claims from the government and private sector are settled, BP expects to have some change left in the clean-up fund when the years of litigation come to an end.