Costs of the Bouchard No. 120 Oil Spill

Related pages:  Past Spills  |   Bouchard No. 120 Page  |   Bouchard No. 120 Oil Volume

An oiled lobster pot and a barrel of floats awaiting disposable. Photo taken in Fairhaven on June 9, 2003.

Costs of the Bouchard No. 120 oil spill

by Dr. Joe Costa, Buzzards Bay NEP Executive Director (certain costs and text were updated in 11/2010 and 3/2011)

[Also read Costa 2011 US District Court declaration on the costs of the oil spill for the case AMERICAN WATERWAYS OPERATORS v. Commonwealth of Mass.]

Soon after the Bouchard No. 120 spill, we noted that Buzzards Bay was like a big bathtub, with walls on most sides, and that we expected much of the spilled oil to wash ashore, rather than floating out to sea. Furthermore, because the 98,000 gallons of spilled No. 6 fuel oil was black and conspicuous, sticky, and hard to clean off surfaces, and because the spill occurred in one of the most densely populated and heavily utilized East Coast shorelines, we expected this spill to be among the most costly to clean on a dollar per gallon basis. This expectation was met, and the Bouchard No. 120 spill became, to that point in time, one of the most expensive spills to clean up per gallon for any spill over 50,000 gallons.

Because the Bouchard Transportation Co. was found criminally negligent in this case, they were responsible for all cleanup costs associated with the spill. No final cleanup costs have been published for the Bouchard oil spill, and the Bouchard Transportation Company may never disclose their costs, so on this page we summarize the best available information obtained by the Buzzards Bay NEP on all the cleanup costs, fines, and settlements related to this spill.

In July 2003, the Command Center had estimated that direct cleanup costs totaled $38 million dollars. This estimate was based on expected costs, and some anticipated costs, such as certain municipal expenditures. However, the latter expenses were largely paid directly through the claims process set up by Bouchard’s Insurance Company. In April 2004, the Buzzards Bay NEP received from Bouchard’s claim agent (TBS) revised amount of $35.5 million in payments for direct cleanup costs (mostly from Bouchard’s contractors), and $2.5 million paid for third-party claims. This claims process paid some municipality expenses, and also paid private damages and loss of income of commercial shellfishermen.

It is worth noting that the NOAA’s webpage Incident News for Bouchard Barge No. 120 states “clean up costs exceeded $23 million”, but this page appears to have been updated only through May 13, 2003. Interestingly the USCG Oil Spill Liability Trust Fund Annual Report for FY 2002-2006 list the Buzzards Bay spill costs as only $1.7 million (an earlier USCG annual report states the cost was $3.8 million), but these were only the payments made through the National Pollution Funds Center, not the cleanup costs paid by the polluter. In February and March 2011, the Buzzards Bay NEP confirmed with the National Pollution Funds Center that they paid only $1,727,625.70 for this spill. This total was principally expenses by federal agencies, with some state and local expenses possibly included. Some of these payments may have been made after 2004. This expenditure through the NPFC would have likely been billed to and paid directly by Bouchard, rather than their claims agent, TBS. This means this expense was in addition to the $35.5 million total from April 2004 described above. Therefore the total paid by TBS and collected by the NPFC was $37.2 million.

This total cost of cleanup to comply with federal regulations, did not include subsequent costs to comply with hazardous material spill cleanup state regulations. This work was undertaken by the firm GeoInsight with diminishing levels of effort until 2008.

Is a $37.2 million clean-up cost under federal law a lot of money for this size spill? Is $2 million or $2.5 million a lot of money for third party claims for this size spill? In April 2004, it was also announced that Bouchard Transportation Company would pay at least $9 or possibly $10 million dollars (depending upon levels of compliance) as a result of a guilty plea in the federal criminal investigation. As of 2011, Bouchard paid a $7.6 million settlement to cover NRDA assessment costs and damages, with the state and federal agencies scientists still evaluating damages to endangered birds, like the Roseate tern. How do these costs compare to other spills?

I try to answer these questions below. However, to understand the costs associated with the Bouchard No. 120 spill in Buzzards Bay, you must go back to the 1989 Exxon Valdez oil spill, and the subsequent federal legislation passed that defines the cleanup and cost processes in the aftermath of an oil spill.

The Exxon Valdez spill and OPA 90

On March 24, 1989 the oil tanker Exxon Valdez grounded on Bligh Reef in Prince William Sound, Alaska, resulting in the release of 10.8 million gallons of Alaska North Slope crude oil. In the first days and weeks of the spill there was considerable confusion as to who was responsible for the cleanup, who would pay for those costs, and what emergency actions that state and federal agencies should take. Because of this accident, the delays and confusion about the cleanup, and the questions about liability for environmental impacts, the US Congress passed the Oil Pollution Act of 1990 (OPA 90). OPA 90 established cleanup procedures, cleanup financing, and the financial claims and damages process used for oil spills today. OPA 90 also set in motion new requirements for the phasing in of double hulled tankers, as well as a wide variety of navigation and other rules designed to reduce the likelihood of future accidents, and ensure their timely cleanup of spills.

Generally, OPA 90 is viewed as a legislative success story. In the decade after the passage of OPA 90, the number of annual oil spills declined 50%, and the volume of oil spilled per volume transported declined nearly two-thirds. In the following years, there have been several notable, but lesser spills than the Exxon Valdez in the US. These new experiences have lead to the federal government further changing and improving upon the oil spill rules and regulations. As a result, today the core of OPA 90 performs these three functions:

• Reduces the potential for future accidents or failures of oil-carrying vessels or oil facilities that could result in oil spills
• Allows the government, in partnership with the Responsible Party, to take immediate control of spills that do occur
• Helps ensure that spilled oil is removed as quickly as practical to help prevent substantive damage to the marine environment

OPA 90 also helped set up a $1 billion Oil Spill Liability Trust Fund for oil spill cleanup. This fund was created by a tax on oil transportation during the early 1990s.

The actual current OPA 90 regulations are found in the US Code Title 33 USC Chapter 40. In 2001, the USCG released a good Programatic Assessment of the OPA90 regulations, which includes an assessment of the relative benefits of double hulls and financial responsibility and other factors in reducing oil spills.

Liability Limits

The limits of liability under OPA are defined in the US Code 33 USC Section 1321 and 33 USC Section 2704. For accidents the size of the Bouchard No. 120, the liability of cleanup costs is $10 million dollars, with the remainder of the cleanup costs being paid by the national oil spill trust fund. However, if the accident was caused by “gross negligence or willful misconduct of, or the violation of an applicable Federal safety, construction, or operating regulation[s]…,” the $10 million limit does not apply. If the Responsible Party is found criminally negligent, they might have to pay all cleanup costs, as well as additional fines and fees.

The OPA liability for the B-120 tank barge at the time of the spill would have been the greater of $22 million or $3,000 per gross ton. With a cargo of 97,000 barrels or roughly 15,000 tons, this suggests a liability of at least $45 million. However, as noted, when the responsible party is found criminally negligent (as in this case), there are no liability limits under OPA.

Bouchard Settlement and Criminal Fines

On March 29, 2004, the US Attorney involved in the case announced that Bouchard Transportation agreed to plead guilty to two charges of criminal negligence and pay a $10 million dollar fine. The $10 million dollar fine will be reduced to $9 million if Bouchard agrees to undertake certain actions. Bouchard has also agreed to pay cleanup costs and approved claims. This agreement was finalized in November 2004. Go to our Criminal Settlement Information page for more information.

How does the Bouchard No. 120 penalty compare to other spills? It is larger than the last New England penalty of $8.5 million for the North Cape, and the dollar amount is among the highest in the US. Deciding upon the penalty amount clearly depends on many factors. However, in reviewing the data from the 1999 Helton and Penn report (data table at bottom of this page), penalties correspond very roughly with cleanup costs as shown by the graphic below. It should be noted that both axes have logarithmic scales, so the data is in fact quite variable.

The Exxon Valdez versus the Bouchard No. 120

It has now been agreed upon by the Coast Guard that 98,000 gallons of oil was spilled by the Bouchard No. 120 in April 2003. While the Exxon Valdez spill is at least 100 times larger than the Buzzards Bay spill, some interesting comparisons can be made between the spills.

Like Buzzards Bay, Prince William Sound is a semi-enclosed body of water with many islands and a complex irregular coastline. Buzzards Bay however, has only 350 miles of coast, in contrast to 3,000 miles of coast in Prince William Sound. If the oil had been spread uniformly around both Buzzards Bay and Prince William Sound on a per mile basis, Buzzards Bay received about 280 gallons per mile, whereas Prince William Sound averaged nearly 13 times more, at 3,600 gallons per mile. Of course, in neither spill was oil uniformly spread around the bay. In Prince William Sound, only 486 miles or 16% of the total shoreline of the sound was oiled to some degree. In Buzzards Bay, a much finer level of oiling was documented (most of Prince William Sound is remote and unpopulated and was not scrutinized to the same level as Buzzards Bay), so the best comparison is made by comparing “light”, “medium” and “heavily oiled” areas of Buzzards Bay (excluding the “very light” and “trace” levels of oiling). The “light”, “medium” and “heavily oiled” areas of Buzzards Bay totaled roughly 51 miles, or roughly 15% of the coast. Thus, on a per mile of affected shoreline basis, Prince William Sound, received 22,000 gallons per affected mile, whereas Buzzards Bay received 1,900 gallons per affected mile.

Crude Oil, like No. 6 oil, has a strong impact on birds. In Prince William Sound, 30,000 bird carcasses were found, or one bird for every 360 gallons spilled. In Buzzards Bay, 462 bird carcasses were found, or one bird for every 220 gallons spilled. Unlike Buzzards Bay, many marine mammals were killed in Prince William Sound (1000 otters and 100 harbor seals). The absence of mammal mortality in Buzzards Bay probably reflects both the lesser abundance of mammals in Buzzards Bay on a per square mile basis, and the more pronounced and continuous abundance of oil in certain parts of Prince William Sound.

Cleanup costs for lighter oils, such as No. 2 Fuel oils tend to be less than the cost of cleanup of heavy crudes or heavier refined oils like No. 6 oil. The Exxon Valdez provides a good reference point for a heavier type of crude oil. Reported cleanup costs for the Exxon Valdez Spill vary, but the total $2.5 billion is often cited. Adjusting for inflation (about a 50% cumulative CPI increase 1989 to 2004, use BLS Inflation calculator), this equals $3.8 billion dollars in 2004, the time by which most emergency response expenses of the Bouchard oil spill had incurred. Adjusted for the volume of the spill, this equals $351 per gallon spilled. In Buzzards Bay, our last reported costs from July 2003 were that the emergency response totaled $38 million, or $388 per gallon spilled. Both cleanup costs per gallon exceed the Exxon Valdez example, and as shown by the tables below, the Bouchard No. 120 spill may have one of the highest per gallon cleanup costs for oil spills over 50,000 gallons.

Besides the $2.5 billion cleanup costs in the Exxon Valdez spill, court settlements and claims totaled $1 billion, and natural resource damages and other punitive damages in the Exxon Valdez spill totaled $5 billion, for a total cleanup and damage cost of $8.5 billion.

Many of the larger spills have comparable cleanup costs per gallon as shown by the table below and as described in the paper by. For example, the June 1989 World Prodigy spill of 294,000 gallons of No. 2 fuel oil in Narragansett Bay Rhode Island had a cleanup cost of $78.4 million, or $267 per gallon.

The Cost of Claims and Property Damages

One of the advantages of OPA 90 is that individuals and businesses can immediately file damage claims and obtain timely reimbursements. This process worked well overall in Buzzards Bay, and commercial shellfishermen, marinas, and property owners received payments for lost incomes, cleaning costs, equipment replacement costs, and other spill cleanup related expenses, including those by municipalities. As of April 2004, more than 460 claims were filed with an undisclosed total payout. Under OPA90, the Responsible Party does not have to disclose the total of the payouts. However, Bouchard’s Agent reported to us that those claims have amounted to $2.5 million. Some of these claims included loss of income (from shellfishermen for example), property damage, or loss. For example, oiled boats or fishing equipment had to be cleaned, or in some cases equipment needed to be replaced, or the company experienced a loss in services. A few of the claims were for emergency response from municipal agencies, and these totals will be known from municipal public meetings. For example, a few of the claims for fire department action may total in the tens of thousands of dollars, but it is likely that most claims were under a few thousand dollars. Given the small number of claims, the $2.5 million total seems consistent. However, many residents did not participate in this process, and two major class action lawsuits were filed in 2004.

NRDA Costs

NRDA costs are not punitive; they are the costs of actual lost environmental and economic “services” of the wildlife and resources lost. When this page was first posted in 2003, I speculated as to how Natural Resource Damage Assessment (NRDA) damages for Buzzards Bay might compare to the cleanup costs or fines, and noted the NRDA costs for the following spills.

In January 1996, the oil tanker North Cape grounded off Moonstone Beach in Rhode Island, and spilled 867,000 gallons of No.2 fuel oil. Much oil washed ashore in a concentrated area, but most washed out to sea and dissipated. Cleanup totaled only $6.6 million or a remarkably low $8 dollars per gallon. Fines for negligence totaled $8.5 million, and the NRDA assessment was valued at $18 million. Similarly, in the American Trader heavy crude spill off Huntington Beach, CA, cleanup response costs were approximately $14 million, and penalties were $5.3 million, and NRDA assessment were valued at $23 million. While in both these cases the NRDA assessment exceeded spill cleanup costs, I stated this would likely not be the case in Buzzards Bay because the NRDA assessment will depend on estimates of the number of animals killed, not the volume of oil or cleanup costs, and that the Bouchard spill appears to have had less birds and invertebrates killed than these two spills, suggesting that the NRDA assessment may be lower. I also noted that some other recent comparable size spills have had NRDA costs only total $1 to $4 million. On the other hand, some threatened US species were killed and their habitat damaged in Buzzards Bay, and the value of these resources could be quite high.

This question was partially answered in November 2010, when Bouchard settled with the federal government and the states of Massachusetts and Rhode Island for $6 million in NRDA damages as outlined in this consent decree). This settlement covers the costs of aquatic and shoreline resources, recreational losses, and certain bird species, but does not include damages to the endangered Roseate Tern and certain other bird species, which are still being studied.

Private lawsuits outside of OPA

Not all property owners filed claims through the OPA process. Some residents filed separate lawsuits instead, which were coalesced into two separate class action suits. One class action suit was filed by Town of Mattapoisett Residents. A separate lawsuit was filed by residents in other towns. These lawsuits were settled in January 2011 for Mattapoisett residents ($12 million) and in November 2010 ($11.45 million) for residents in other towns. Information on these settlements are provided on these two websites:

Mattapoisett Residents: buzzardsbaysettlement.com

Non-Mattapoisett Residents: www.bouchardsettlement.com

Summary of actual and potential costs for Bouchard under federal and state law, and legal suits

Expense Category	Process	Estimated	Payment by: Responsible Party	Payment by: Oil Spill Liability Trust Fund	Comments
Federal Cleanup Costs	Overseen by Command Center	$37.2 Million	up to $10 Million (for this size spill)	balance	$38 million was estimated at incident command in July 2003, but a revised $35.5 million total paid was reported by Bouchard’s Claim processor on 19 April 2004. In addition, the NPFC reported an additional $1.73 million in expenses billed to BTC for mostly state and federal agency costs. The RP was responsible for all costs because it was criminally negligent. See text for additional explanation.
Costs to meet State Hazardous Material Spill Cleanup Law	Overseen by Mass DEP	$1-$1.5 million to consultants (estimated)	All	None	Under the federal cleanup effort, Bouchard hired many consultants to assess impacts during the emergency response phase (Entrix was one of the leads). Once the federal emergency response ended, Bouchard hired another consultant (GEOInsight) to meet state cleanup requirements under Mass General Law 21E and MA Contingency Plan. This work continued at diminishing levels until 2008. The state’s costs for working on this assessment was paid by Bouchard as outlined in the consent decree (totaling several hundreds of thousands in state staff time and other expenditures), and are included with NRDA costs below.
3rd Party Claims Process	Claims filed with BTC’s insurance company, only claims accepted by RP are paid	>$2.5 Million estimated, total not disclosed	All	None	Includes private claims and some municipality claims submitted directly to Bouchard under the OPA process. Commonwealth of Mass Agencies have, and continue to submit claims under this process to compensate for state employee time.
Natural Resource Damages	NRDA Trustees	$7.7 million	All	None	A partial $6.1 million dollar plus interest damage settlement consent decree covers aquatic and shoreline resources, recreational uses, and some birds, but not terns, loons, and certain other species. The additional $1.6 million were payments previously made to state and federal agencies for employee time and expenses related to their work on the damage assessment. The $6 million will be used to restore habitat and natural resources, principally in Buzzards Bay. Read the consent decree.
Private Lawsuits	Legal system	$11.5 + $12.4 Million	All	None	Two private class action suits were filed. $12.4 million to Mattapoisett Residents: buzzardsbaysettlement.com, $11.5 million to Non-Mattapoisett Residents: www.bouchardsettlement.com
Criminal Fines	Settlement of criminal case	$9	All	None	Criminal fines vary from case to case. For this spill the fines were set at $9 or $10 million, but was limited to $9 million because all terms are met in settlement. The initial $9 million was paid immediately of which $7 million was directed to the NAWCA program. and $2 million to the oil spill liability trust fund. These funds have already been spent or encumbered.
Total	Likely range of all actual and possible remaining	$82-100 million			Most costs should be finalized by 2012.

Costs not included in this table include the RP’s casualty and salvage loss, and financial losses of cargo, which may be covered by their insurance.

Oil Spill Costs Comparison Tables

In the table below, clean up costs per gallon are shown to illustrate the variability in this expense depending on the oil, and how much washed ashore. Values were adjusted to 2003 values using the Bureau of Labor Statistics CPI calculator. The Bouchard 120 cleanup costs include reported and estimated 3rd party claims, including municipal expenses, but not expenses associated with cleanup requirements for the Massachusetts Hazardous waste cleanup law, which continued for 6 years after the spill.

Accident	year	oil type	volume (ga)	infl. adj. clean-up costs	cost per gallon	penalties
Exxon Valdez, Price William Sound AK	1989	Crude	10,836,000	$3,800,000,000	$351	$165,000,000
Bouchard 120, Buzzards Bay	2003	No. 6	98,000	$38,000,000	$388	$10,000,000
North Cape, Moonstone Beach RI	1996	No. 2	828,000	$6,600,000	$8	$8,500,000
World Prodigy, Narragansett RI	1989	No. 2	294,000	$29,992,500	$102	?
American Trader, Huntington Beach, CA	1990	H Crude	397,236	$19,600,000	$49	$5,300,000

The following table is from Helton, D. and T. Penn. 1999. PUTTING RESPONSE AND NATURAL RESOURCE DAMAGE COSTS IN PERSPECTIVE. Paper ID #114, 1999 International Oil Spill Conference. The dollar values were adjusted to 1997 dollars.

Incident	PRP Response	Public Response	NRDA	3rd party	Penalties	Other	Total
Amazon Venture	41.80%	3.20%	49.60%	?	?	5.30%	$3,849,679
American Trader	20.60%	3.40%	39.50%	20.60%	9.10%	6.80%	$71,536,431
An Ping	?	61.20%	5.10%	?	31.60%	2.10%	$492,877
Apex Houston	?	0.50%	94.90%	?	3.80%	0.10%	$9,880,307
Apex Towing/Shinoussa	?	39.20%	26.90%	?	?	34.00%	$7,355,975
Arco Pipeline	?	3.90%	32.80%	54.70%	6.00%	2.60%	$23,759,517
Arco Anchorage	94.80%	2.10%	2.30%	?	0.20%	0.60%	$20,463,216
Berry Petroleum	?	38.60%	33.80%	1.30%	25.50%	0.80%	$4,351,687
BT Nautilus	82.40%	0.70%	16.50%	?	?	0.40%	$29,787,835
Burlington Asphalt	?	80.80%	17.90%	?	?	1.30%	$304,522
Colonial Pipeline	50.40%	2.00%	8.40%	33.60%	5.00%	0.50%	$33,033,904
Exxon Bayway	30.90%	?	17.10%	?	8.60%	43.30%	$71,427,585
Exxon Valdez	27.30%	1.50%	9.70%	57.80%	0.30%	3.50%	$11,859,836,448
Fortuna Reefer	?	23.80%	76.20%	?	?	?	$1,640,000
Glacier Bay	1.00%	3.60%	0.00%	95.30%	?	0.10%	$90,482,442
Greenhill	?	24.70%	73.60%	?	?	1.60%	$3,101,243
Jahre Spray	?	34.00%	47.00%	9.80%	2.60%	6.60%	$319,535
Jupiter	?	3.40%	10.40%	81.30%	?	4.90%	$7,555,393
Mega Borg	?	61.30%	5.00%	?	?	33.60%	$6,706,201
Mobil oil	35.90%	0.50%	2.60%	?	0.50%	60.60%	$12,910,203
Morris J. Berman	5.90%	48.30%	?	1.30%	44.30%	0.20%	$183,186,201
Nestucca	23.50%	23.40%	20.50%	4.20%	?	28.40%	$28,916,857
Nosac Forest	?	13.40%	49.40%	?	36.30%	0.90%	$275,735
Presidente Rivera	?	47.10%	41.00%	3.20%	6.50%	2.20%	$8,017,890
Quinnipiac River	?	94.30%	5.40%	?	?	0.30%	$736,047
RTC-380	?	41.00%	56.70%	?	?	2.40%	$466,399
Tenyo Maru	16.20%	36.10%	37.10%	0.10%	10.10%	0.40%	$17,473,459
Texaco Anacortes	79.80%	1.50%	5.00%	?	5.00%	8.70%	$11,809,453
Unocal Tank Farm	88.60%	1.80%	9.50%	?	?	0.10%	$16,782,110
World Prodigy	39.00%	22.00%	9.00%	14.60%	13.90%	1.40%	$9,285,247

 

Links relating to Oil Spill Costs and OPA 90

Estimating Cleanup Costs for Oil Spills (web article, 1 MB pdf file)
Worldwide Analysis of Marine Oil Spill Cleanup Cost Factors (web article, 1 MB pdf)
NOAA Oil spill case histories (2 MB pdf file).
USCG Regional Response Teams Pamphlet Series page
Newspaper Article on a recent Washington state spill: “Oil spill costs — in dollars, ecological damage — rising.”
UC Santa Barbara PhD student (Victoria Broje) web page of oil spill links
USCG OPA 90 Programmatic Regulatory Assessment (2001)
US EPA site on oil spill penalties
Tank barge regulations
1995 Federal Register notification on tank barge regulations.