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International Liability for the BP Oil Plume

New York Law Journal

August 26, 2010

Public discussion of the environmental impacts of BP’s Deepwater Horizon explosion and resulting oil plume has focused almost exclusively on BP’s liability to U.S. plaintiffs (federal, state and private) under the Oil Pollution Act, the Clean Water Act, the Endangered Species Act or, more recently, the $20 billion trust fund “voluntarily” established by BP to compensate U.S. businesses and individuals for a portion of their injuries. There has been virtually no discussion of the potential liability of BP or the U.S. government to foreign nations or citizens whose environment or businesses may be injured by the spreading subsurface plume.

Similarly, there has been little public discussion, at least in the United States, of how to establish a workable international regime to reduce the likelihood of similar environmental disasters in other deep-water oil fields around the world. Nor has there been more than glancing reference to any remedy for BP’s tortuous conduct beyond liability to injured U.S. plaintiffs. On the contrary, it has been assumed that, because of the enormous size of the oil and gas deposits included in BP’s lease from the U.S. Minerals Management Service (MMS), even BP’s $20 billion escrow fund is a manageable price for it to pay for future exploitation of those deposits.

This column offers an initial assessment of each of these issues. As discussed below, customary international law principles, as codified in the United Nations Convention on the Law of the Sea (UNCLOS), strongly suggest that the United States is liable to injured nations and private parties for economic and environmental damage from the BP oil plume. (There may also be a basis for a similar claim by the world community for environmental damage to the high seas.) However, current international environmental law fails to provide an effective remedy for these violations of customary law, and the prospects for enforcement of such obligations in U.S. courts are at best modest.

Domestic U.S. law does, however, provide a strong basis for the Obama administration to suspend, or cancel outright, BP’s current Gulf lease. This would make clear that BP may not retain the enormous economic jackpot of its Gulf oil field while largely escaping liability for the extensive environmental and economic injury it has caused. Lease cancellations would also help establish a worldwide standard for international regulation of deep-water oil and gas exploration under UNCLOS. The long-term U.S. interest in such a standard provides yet another reason for the U.S. to cure its longstanding failure to accede to UNCLOS and to join the rest of the developed world in enforcing that convention’s requirements for the protection of the marine environment.

UNCLOS

So far, no nation has made any claim against the U.S. as a result of the BP plume. However, Cuban officials have expressed concern about patches of oil spotted off their coast, which prompted Cuban authorities to bring in Venezuelan “experts” to consult on damage claims.[1] Some Caribbean officials also “expressed worry” about the oil hitting their shores during a meeting with Secretary of State Hillary Rodham Clinton in June, though this fear has also yet to be realized.[2] Of course, anticipating the path of the oil is difficult to do, and many experts are concerned that the environmental efforts of the sub-surface plume will not be known for many years.[3]

Unfortunately for such potential claimants, most international treaties that address oil pollution do not apply to the BP plume because they regulate pollution from a ship, not from an offshore well. For example, the Convention on Civil Liability for Oil Pollution narrowly defines “pollution damage” as “loss or damage caused outside the ship by contamination resulting from the escape of discharge of oil from the ship.” Similarly, the International Convention for the Prevention of Pollution from Ships (MARPOL 73/78) contemplates oil damage from a shipping accident, seeking to remedy the problem of oil pollution by setting double-hull and other ship design standards.

The notable exception is UNCLOS, which takes a far more expansive view of marine pollution. Although the United States is not a party to UNCLOS,[4] most experts believe that the U.S. is nevertheless bound by UNCLOS to the extent that it represents customary international law.

Unlike the Convention on Civil Liability and MARPOL, UNCLOS includes language that closely tracks the circumstances of the BP spill. Article 1(4) defines “pollution of the marine environment” broadly, encompassing any direct or indirect introduction by man of a substance into the marine environment that results in “deleterious effects.” Such effects include harm to living resources, marine life and human health, as well as “hindrance to marine activities, including fishing and other legitimate uses of the sea, impairment of quality for use of sea water and reduction of amenities.”

Article 192 of UNCLOS imposes affirmative duties on the states with respect to environmental protection of the marine environment, and Article 194 provides that “[States must] take all measures necessary to ensure that activities under their jurisdiction or control are so conducted as not to cause damage by pollution to other states and their environment, and that pollution arising from incidents or activities under their jurisdiction or control does not spread beyond the areas where they exercise sovereign rights.” Article 194 extends to measures taken to minimize all sources of marine pollution, including pollution from “installations and devices used in exploration or exploitation of the natural resources of the seabed and subsoil.” Id. §194(3)(c).

From the outset, these provisions were seen as governing offshore drilling operations. See, for example, John Warren Kindt, “The Law of the Sea: Offshore Installations and Marine Pollution,” 12 PEPP. L. REV. 381, 413 (1985) (“Regardless of where an offshore installation is located, its construction and operation would be subject to a recognized duty to protect and preserve the marine environment from pollution, as established and codified by the LOS Convention.”).

UNCLOS imposes additional obligations relevant to the BP plume, including the obligation of coastal states under Article 208 to “adopt laws and regulations to prevent, reduce and control [marine] pollution arising from…seabed activities [or] artificial islands, installations and structures [subject to] their jurisdiction.” Article 108 requires states to immediately notify other states and “competent international organizations” when they become aware that the marine environment is in “imminent danger of being damaged or has been damaged by pollution.” Article 214 provides that parties “shall enforce their laws and regulations…and shall adopt laws and regulations and take other measures necessary to implement applicable international rules and standards…to prevent, reduce, and control pollution of the marine environment…arising from activities [under their jurisdiction.]”).

Although it clearly sets forth the obligations discussed above, UNCLOS does not make clear how, and to what degree, states may be held liable for a failure to meet those obligations. Generally, Article 235 states only that states may be found liable “in accordance with international law” for failure to fulfill their “international obligations concerning the protection and preservation of the marine environment.” Nor does UNCLOS establish a binding procedure by which disputes involving non-parties may be litigated before the International Tribunal for the Law of the Sea or another international body. See UNCLOS, art. 287, and generally UNCLOS, part XV. Although the U.S. could, of course, voluntarily agree to arbitrate such claims against it, this seems unlikely under present circumstances.

In theory, UNCLOS claims could also be brought in the International Court of Justice (ICJ), which “settle[s], in accordance with international law, legal disputes submitted to it by States and…give[s] advisory opinions on legal questions referred to it by authorized United Nations organs and specialized agencies.” However, jurisdiction of the court in contentious proceedings is based on the consent of the states. Unfortunately, the U.S. withdrew its consent to ICJ jurisdiction because of an adverse ICJ ruling over the Reagan administration’s mining of Nicaraguan waters in the 1980s.

U.S. Alien Tort Claims Act

Because liability for transboundary environmental harm constitutes a well-established principle of customary international law, it might be possible to bring a claim against the United States or BP under the Alien Tort Claims Act (ATCA), which gives the district courts “original jurisdiction of any civil action by an alien for a tort committed in violation of the law of nations or a treaty of the United States.” 28 U.S.C. §1350. However, the U.S. Supreme Court held in Sosa v. Alvarez-Machain, 542 U.S. 692 (2004), that jurisdiction for international customary law claims under the ATCA should only be recognized where the international law principle, or norm, is clearly established at a level comparable to the customary international norms in effect when the ATCA was enacted.

As a general matter, courts have only rarely exercised jurisdiction under the ATCA for international customary environmental law claims. (See Stephen L. Kass and Jean M. McCarroll, “After Sosa: Claims Under the Alien Tort Claims Act-Parts I, II and III,” NYLJ, Aug. 27, 2004, Oct. 26, 2004, Dec. 23, 2004). Beyond the jurisdictional threshold established by Sosa, the doctrine of forum non conveniens has also led most federal courts to dismiss ATCA claims, particularly those alleging environmental violations (See Stephen L. Kass, “A Most Inconvenient Forum,” NYLJ, April 23, 2010).

Nevertheless, ATCA claims by foreign plaintiffs injured by the BP oil plume may have a better chance of success than those previously considered by the courts. The UNCLOS provisions cited above reflect well-established principles of customary international law binding on all nations, whether or not they are parties to UNCLOS. The combination of U.S. governmental laxity in regulating BP and BP’s apparent disregard for both safety and environmental protection at its Deepwater Horizon facility (and elsewhere) constitutes precisely the type of conduct that UNCLOS seeks to prevent. Moreover, the relevant actors, witnesses and experts are located in the U.S., where the explosion itself occurred. Under these circumstances, a foreign plaintiff able to prove damages from the BP plume would be in a far stronger position than previous environmental litigants under ATCA.

There is another reason, in addition to providing a judicial remedy to injured foreign plaintiffs, why U.S. courts should consider a sympathetic approach to ATCA claims arising out of the BP oil plume. As my former colleague Noah Sachs has suggested in a recent article,[5] one way to overcome the conspicuous enforcement gap that undermines international environmental law is through the “up-loading” of national judicial remedies into international practice, as has already begun with respect to human rights. Judgments by U.S. federal courts applying the UNCLOS standards would go far toward providing such a domestic precedent for other national and international courts, helping to make the standards codified in UNCLOS a reality in other jurisdictions where deep-water oil exploration presents similar risks.

In the long term, it is surely in the United States’ interest not only to improve its own regulations of deep-water drilling, but to encourage other nations to do the same so that this littoral “race to the bottom” does not inflict greater damage to the Earth’s already stressed marine environment.[6]

BP’s Lease

In addition to ATCA claims, U.S. law provides another potential remedy against BP—canceling or suspending its lease from MMS. BP’s lease[7] is subject to the requirements of the Outer Continental Shelf Lands Act of 1953 (OCS Act),[8] the act’s regulations, and the U.S. Department of the Interior’s nonprocurement, debarment and suspension requirements. The lease also provides that MMS can suspend or cancel the lease pursuant to §5 of the OCS Act, which contains two different mechanisms for those actions. First, §§1334(c) and (d) authorize the cancellation of producing and non-producing leases in the event that the lease owner violates its lease or applicable laws and regulations (BP’s lease is classified as a “producing” lease because BP produces oil, gas, or sulphur in quantities sufficient to generate royalties under the lease). While this section provides broad authority for canceling a lease upon non-compliance by the lessee, it requires that a judicial proceeding be brought to effectuate the cancellation.

The other means for canceling or suspending a lease under the act is through §§1334(a) and its implementing regulations at 30 CFR Part 250.172, 30 CFR 250.173 (suspensions) and 30 CFR 250.181 (cancellations).

Requirements under 30 CFR Part 250.181 allow the secretary to cancel a lease after notice and opportunity if the following conditions are met: (1) “[c]ontinued activity on the lease would probably cause harm or damage to life (including fish and other aquatic life), property, any mineral deposits (in areas leased or not leased), or the marine, coastal, or human environment; (2) the threat of harm or damage will not disappear or decrease to an acceptable extent within a reasonable period of time; (3) the advantages of cancellation outweigh the advantages of continuing the lease in force; and (4) a suspension has been in effect for at least five years or [the lessee] request[s] termination of the suspension and lease cancellation.”

There are strong arguments that the first three prongs of this test are met by the BP oil spill and plume. However, the fourth prong of the test—suspension for five years—cannot be met at this time. Thus, at least for the time being, cancellation under §1334(a) is not feasible.

In general, the regulations provide for compensation in the event that MMS cancels a lease. However, 30 CFR Part 250.185 provides that there will be no compensation for a lease cancellation if “the Secretary forfeits and cancels a producing lease under section 5(d) of the Act (43 USC 1334(d).” Thus, if the lease were cancelled under that provision, BP would receive no compensation for the cancellation.

Section 1334(a)(1) also instructs the Secretary of the Interior to issue regulations for the suspension of a lease. These regulations are in 30 CFR Part 250.172 and 30 CFR Part 250.173. Section 172(b) provides that the Regional Supervisor can grant or direct a Suspension of Operation or a Suspension of Production when “activities pose a threat of serious, irreparable, or immediate harm or damage.”

The regulation specifies that such a threat “include[s] a threat to life (including fish and other aquatic life), property, any mineral deposit, or the marine, coastal, or human environment.” Under 30 CFR Part 250.73, a directed suspension can extend the term of a lease, unless the suspension is due to “(1) gross negligence; or (2) a willful violation of a provision of the lease or governing regulations.” BP’s conduct arguably rises to this level, so that a suspension of the lease should not result in an extension of the lease term.

Yet another route for terminating the BP lease would be for the government to revoke BP’s status as an “operator.” Under 30 CFR Part 250.135, if BP’s “operating performance” is unacceptable, the government can revoke its status as “operator” of the facility. 30 CFR 250.136 details factors that help determine whether operating performance is acceptable. It provides as follows: “In determining if your operating performance is unacceptable, MMS will consider, individually or collectively: (a) accidents and their nature; (b) pollution events, environmental damages and their nature; (c) incidents of noncompliance; (d) civil penalties (e) failure to adhere to OCS lease obligations; or (f) any other relevant factors.”

There is a strong argument that factors (a), (b), (c), and potentially (d) and (f), support a determination that BP’s operating performance is, and was, unacceptable.

In sum, the government’s options for canceling or suspending BP’s lease are as follows:

(1) suspend the lease under 43 U.S.C. §1334(a)(1) and its corresponding CFR Part, 30 CFR Part 250.172. (after five years, the U.S. would have the option to cancel the lease pursuant to 43 U.S.C. 1334(a)(2)); (2) commence an action to cancel the lease pursuant to 43 U.S.C. §1334(d) on the grounds that BP failed to comply with its lease and applicable laws and regulations; (3) debar or suspend BP and prevent it from receiving government contracts, including future oil leases; and (4) revoke BP’s status as “operator” if it finds BP’s performance unacceptable.

If any of these options were exercised by the Obama administration, it would send a clear signal to deep-water operators in the United States and elsewhere that malfeasance and pollution on the scale of the BP oil plume not only exposes the operator to clean-up and compensation obligations, but also risks forfeiting the right to exploit sensitive public resources. This would not only be an appropriate response under domestic U.S. law, but could also “up-load” a new remedy into international practice under UNCLOS and give other coastal nations increased leverage to insist on environmentally responsible conduct as a condition to continued deep-water oil exploration. To enhance the United States’ ability to achieve that goal, President Obama should also follow the advice of a 2009 Council on Foreign Relations report on “The National Interest and the Law of the Sea” and immediately urge the Senate, at long last, to ratify UNCLOS.


Stephen L. Kass is a partner at Carter Ledyard & Milburn and co-director of the firm’s environmental practice group. He is an adjunct professor of international environmental law at Brooklyn Law School. Emily Bayer-Pacht and Alyssa Kaplan, second-year students at Cardozo School of Law, assisted in the research for this column.

This article is reprinted with permission from the August 26, 2010 issue of the New York Law Journal  © 2010 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.


Endnotes


[1]See “Cuba Braces to Contend with BP Oil Spill,” THE GUARDIAN, June 16, 2010.

[2]See Agence France Presse, “Caribbean Officials Worry Oil Spill May Reach Pristine Shores“ (June 10, 2010).

[3]See e.g., Jessica Gresko, “Cloudy with a Chance of Tarballs,” WASH. POST (July 19, 2010).

[4]The U.S. did sign the Implementation Agreement, which governs the organization and implementation of institutions within the International Seabed Authority.

[5]See Noah Sachs, “Beyond the Liability Wall: Strengthening Tort Remedies in International Environmental Law,” 55 UCLA L. REV. 837 (2008). Mr. Sachs also notes the lack of a private right of action under “primary” treaties. Id. at 846.

[6]One sign that the international community is moving toward regimes of domestic liability for all damage caused by activities dangerous to the environment is the United Nations Environment Programme draft outline for domestic legislation on liability, response action, and compensation for damage caused by activities dangerous to the environment. This 2009 document has not been adopted by UNEP’s Governing Council, and its purpose is merely to advise states in drafting domestic laws addressing liability and compensation.

[7]BP’s lease, lease number 206, is available on the Minerals Management Service (MMS) Web site at www.mms.gov.

[8] 43 U.S.C. 1331 et seq.


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