The true fallout from the BP oil spill may be unimaginable

The U.S. government and BP are rushing to put the Gulf spill behind them—but it’s not over yet

Chris Bickford and Stephen Crowley The New York Times/ Gerald Herbert/AP

It only took a few weeks for Jim Cowan to discover there was more to BP’s massive Macondo oil spill than meets the eye. He was part of a team of scientists that took to the waters of the Gulf of Mexico shortly after an April 20 explosion aboard the Deepwater Horizon killed 11 workers and caused the US$350-million drill rig to sink. As oil gushed uncontrollably from the damaged well 5,000 feet below, Cowan and his colleagues plied the waves until they came across a telltale sheen. They dropped their remotely operated submersible beneath the slick and confirmed their fears—a giant moving cloud of oil droplets, later dubbed a “plume.”

The discovery challenged the all-oil-rises-to-the-surface belief that had been guiding the cleanup and containment efforts. And it was met with resistance from both BP and the U.S. government, which had given the oil giant permission to spray an unprecedented amount of chemical dispersants on the surface and, unusually, at the source of the leak. “We took a lot of heat,” says Cowan, an oceanographer at Louisiana State University. “There was a great deal of denial.”

More than three months later, the well appears to be on its way to being permanently capped, but Cowan and other scientists feel as though they’re still facing a sense of denial. This time, however, it’s about the extent of the ecological damage, with the underwater plumes once again figuring prominently into the equation. Indeed, ever since BP managed to stop the flow of oil into the Gulf on July 15, there has been a rush to turn the page on the worst oil spill disaster in American history. In a bid to revive ailing fisheries and the region’s tourism industry, U.S. President Barack Obama has been photographed frolicking in the surf with daughter Sasha and chowing down on Gulf Coast seafood whenever possible. Meanwhile, a recent government report suggested three-quarters of the 4.9 million barrels of spilled crude is no longer much to worry about, with much of it having been “dissolved” or dispersed. Even BP seems to have found its footing again. It has dumped its gaffe-prone CEO, struck a deal with Washington on a US$20-billion compensation fund, and is likely to be a key beneficiary from the current push to lift the moratorium on new drilling in the Gulf, where it is a key player.

But the nagging question remains: what happened to all of that undersea oil? While efforts to disperse the gushing crude may have helped minimize damage to the region’s sandy white beaches, there are mounting fears it did so at the expense of turning the Gulf into a toxic soup of hydrocarbons and other chemicals—the fallout of which could ultimately prove to be far worse and longer-lasting to the region’s marine life and the local economies that depend on it. “This was the largest man-induced oil spill to have occurred anywhere, and at one point the surface slick was as big as the state of Kansas,” says Cowan. “And we think only a fraction of the oil made it to the surface.”

On Aug. 2, the National Oceanic and Atmospheric Association and the Department of the Interior released a study that attempted to account for the nearly five million barrels of oil that had been released into the Gulf over a period of more than 100 days. It suggested that 25 per cent of the crude had been mopped up by ships or lit on fire. Another 25 per cent is believed to have simply evaporated or dissolved, while 24 per cent was dispersed into tiny droplets—some of it naturally and some because of the estimated 1.8 million gallons of chemical dispersants used. The remaining 26 per cent is believed to be on or just below the surface or “has washed ashore or been collected from the shore, or is buried in sand and sediments.”

Of course, 26 per cent of 4.9 million barrels is still about 1.3 million barrels, or about five times what the Exxon Valdez spilled into Alaska’s Prince William Sound in 1989, creating what had previously been the worst-ever oil spill in the U.S. And Cowan and other scientists aren’t convinced that underwater clouds of oil are any less dangerous to marine life than bird-killing surface slicks. The same goes for “dissolved” oil. While the government report compares it to sugar dissolved in a cup of water, Cowan notes wryly that sugared water “still tastes sweet when you drink it.” Even the government figures remain contentious—a new report from the University of Georgia says 79 per cent of the spilled oil is still in the Gulf.

While commercial fisheries in the Gulf are slowly being reopened following testing by health officials (the industry is worth US$2.4 billion in Louisiana alone), Cowan says he is concerned that dispersed or dissolved oil may actually be easier for fish to ingest through their gills, adding that many non-scientists overlook the fact that animals tend to be resilient in the face of a short-term threat—oil-stained birds, for instance, can be cleaned off and released—but are often extremely vulnerable to long-term exposures to toxins. He just can’t shake a feeling that BP’s decision to rely heavily on dispersants, themselves toxic, could one day prove to have been a deal with the devil. “The problem with the dispersants,” Cowan says, “is that they kept so much of the oil away from the surface, but subsurface oil is impossible to clean up.”

Anita Burke has first-hand experience with oil spills and the chemicals used to treat them. She once worked as a consultant on the front lines of the Exxon Valdez spill. “Corexit”—the brand of dispersant used in the Gulf—“is a pretty nasty solvent,” says Burke, who formerly also held the title of senior adviser in charge of sustainable development for Shell. “I was pretty shocked when I saw they were injecting that directly into the wellhead. The stuff just doesn’t go away. I think it’s early days and I’m nervous about the outcome.”

BP, however, is sticking by its decision. “The purpose of dispersants is to break the oil down into ‘bite-size’ particles for the naturally occurring microbes to eat,” says Robert Wine, a spokesperson for the London-based oil giant, noting that the use of dispersants was approved by the U.S. Environmental Protection Agency. He added that the Gulf of Mexico “is rich in oil-eating microbes because of the high levels of natural seepage anyway, and the warm waters.”

If BP is wrong, however, it’s not clear whether it can be made to pay for the longer-term damages. The company and the U.S. government have agreed to set up a $20-billion cleanup and compensation fund over the next 3½ years that will pay out all “legitimate claims” by residents and businesses that suffered because of the spill, as well as the costs incurred as a result of local, state and federal cleanup efforts. The fund, to which BP has already made an initial contribution of US$3 billion, will also accept claims for “natural resource damages,” although neither BP nor the U.S. government has offered specifics.

Tallying the longer-term damage from the spill isn’t easy. In addition to the direct costs of the cleanup, one estimate, by Moody’s Analytics, suggested it could cost the Gulf Coast region 17,000 jobs and about US$1.2 billion in lost economic growth by the end of the year. Another study, by Oxford Economics, pegged the cost to the tourism industry alone at US$7.6 billion to US$22.7 billion. BP, which has so far spent US$6.1 billion on stopping the leak and cleanup efforts, has taken a US$32-billion writedown related to the spill, although some analysts have speculated the total figure could climb as high as US$50 billion. That includes lawsuits and civil fines, which could be as high as US$21 billion if BP is found guilty of “gross negligence” in the disaster. The state of Alabama has already filed lawsuits against BP and the companies it worked with on the Deepwater Horizon, although the suits have yet to put a price tag on the damages being sought.

Despite the growing financial impact, it’s increasingly looking as though the company may actually be able to skate through the disaster with a few deep, but not fatal, wounds. For one thing, many of BP’s cleanup costs can be deducted from its taxes, creating an estimated US$10 billion in future savings—a figure that was confirmed by Wine, BP’s spokesperson. BP also has an estimated US$250 billion worth of assets that it can sell if it needs to raise money (it has already pledged to sell assets worth about US$30 billion). And, most importantly, it now has a powerful partner in the U.S. government, which isn’t eager to see BP cratered since the cost of cleaning up the mess would then land in its lap. Investors, too, are gradually becoming more optimistic. Shares have climbed more than 35 per cent since bottoming out in late June.

BP’s road to recovery is also being fuelled by a widespread desire to forget that the ugly incident ever happened. Amid pressure from local politicians, who depend on the offshore industry to create local jobs, U.S. government officials suggested last week that the Obama administration’s temporary ban on offshore drilling could be lifted well before the Nov. 30 deadline. “The moratorium on new drilling is in effect a moratorium on new supply in the U.S,” says Jeff Rubin, an author and former bank economist. “Deepwater has been the single largest source of new supply over the last 10 years, and BP was at the forefront of that.”

It all raises the question of whether steps will be taken to reduce the possibility of a similar accident in the future. While officials say they are still examining the need for changes to safety procedures and regulation of the industry before eliminating the ban, experts say rising oil prices and rising global demand mean the job of finding oil and extracting it will only become more difficult and dangerous. “The last half of the [world’s] crude is stuck in weird places and requires intense amounts of money and energy to get at it,” says Burke. In the case of deepwater rigs, she says, “you’re dealing with a complete unknown area and unknown pressures. We don’t know what’s going to happen when we start poking holes in these reservoirs.”

What we do know, thanks to BP’s disaster in the Gulf, is that the cost of drilling pales in comparison to the price of cleaning up after something goes wrong—if indeed it can ever be cleaned up at all. Burke recalls a moment during the cleanup of the Exxon Valdez. She was standing in a “dinky little bay, about the size of a two-car driveway, and the spill is about the size of New York City,” trying to collect dime-sized globules of oil sprayed on the rocks by waves. The futility of the effort hit her and she began to cry. “You go up to Prince William Sound right now and dig down three feet and there’s still oil there,” she says. “We’re 25 years later, and we didn’t put all those chemicals in the water like they did in the Gulf, and they still don’t have a herring run.”