The Deepwater Horizon disaster attributed to BP, a multinational oil and gas company, occurred in 2010 dumping massive amounts of oil in the waters on the gulf coast. The BP is headquartered in London with operations in 80 countries with the largest being in the United States. Team B participated in a simulation that presented a similar scenario as the oil spill mentioned.
The company in the simulation is an American based organization that produced aluminum. Alumina was accused of violating the United States Environmental Protection Agency (EPA) standards omitting higher discharges in the water than allowed. Alumina is facing charges of negligence by a mother, claiming her daughter became ill with cancer due to the negligence. The cases present obvious legal issues such as loss of income within the tourism industry due to negligence, potential health issues, and wrongful death.
Another element is the impact on the environment and the responsibility to repair the damages. The paper will determine the legal issues involved in the lawsuit, compare and contrast between the two cases and examine the role of management reaction. Legal Issues
The most obvious legal issue that is present in the BP case as well as the Alumina simulation is the case of negligence. Negligence can be defined as “the omission to do something which a reasonable man would do, or doing something which a prudent and reasonable man would not do” (Cheeseman, 2010). As a result of the primary issue of negligence by both BP and Alumina, there are other legal issues that have presented themselves.
There are health issues and problems resulting from the spill. In the Alumina simulation, the family claims Alumina’s actions are the cause of the child’s leukemia. In the case of the BP oil spill, the health problems and risks are being reviewed. Many residents of the Gulf coastline are beginning to experience issues related to the toxic chemicals resulting from the spill. Another legal issue resulting from the BP oil spill is the loss of income and business profits.
The oil spill in the Gulf of Mexico continues to affect the livelihood of businesses in the area. Business affected include the commercial fishing industry, boat operators, hotel operators and many more. The environmental damages as a result of this spill are still being determined. In August 1990, the Oil Pollution Act (OPA) was signed into law to regulate those involved in the industry, mainly as a result of the Exxon Valdez incident.
“The OPA increased penalties for regulatory noncompliance, broadened the response and enforcement authorities of the Federal government, and preserved State authority to establish law governing oil spill prevention and response” (U.S. Environmental Protection Agency, 2011). The spill has caused potential damage to the coastlines, wetlands and wildlife of the Gulf region. Lastly there is the issue of wrongful death resulting from the incidents. In the Alumina simulation, there currently are no deaths associated with the incident.
However, with the BP spill, 11 workers were killed in the explosion of the Deepwater Horizon. The poor risk management decisions before and after the explosion have been cited as evidence to the negligent behavior of the corporation.
In completing the simulation, it was apparent to Team B that both Alumina and BP had similar challenges. Alumina and BP are being accused of taking actions that impact the environment. Both companies have had violations of compliance to regulations before. When EPA testing found higher concentrations of PAH in the waters and ordered a cleanup, Alumina responded and took steps that remedied the violation. Several years later when a local resident accused Alumina’s actions as the cause of her daughter’s leukemia, management responded by conducting a private study to confirm compliance with EPA standards.
Subsequently after a request, Alumina released an environmental report audit report which detailed EPA findings. Due to the magnitude of the spill, BP has not been so forth coming. BP is being held responsible for the cleanup of the Gulf, but according to one article it is only to the extent that damages can be proven (Houck, 2010). A review of records show potential EPA violations during normal operations that have not been reported (Houck, 2010).
The deterioration of the land mass in the Gulf has a direct correlation to the canals that have been built to accommodate oil production, but the cost to fix the problem has been deemed too expensive to address by BP management. Efforts are underway to find resources at the federal and state levels to address the issue. To minimize legal cost, both Alumina and BP hope to settle some issues outside of a standard trial. Although Alumina has a good record of compliance with environmental standards and could possibly win in court, management understands that the impact of public opinion could affect future revenues in the future.
Alumina will try mediation to settle the case. BP has established a $20 billion fund to settle claims against the company. Anyone who settles through the fund waives rights to sue BP or other related entities involved with the spill (Searcey, 2011).
Management Response The BP oil spill magnified the lack of risk management that the British Petroleum Corporation had in place. Every organization has liability risks that they need to prepare for, and as evidence from the Exxon Valdez and BP oil spill, oil drilling comes with much risk. “To minimize such risks, an organization should understand how they may arise and then take active steps to eliminate the factors that may contribute to unexpected or unwanted legal obligations” (Azria, p.1). BP came under scrutiny in the aftermath of the oil spill, because of the lack of risk management in place.
After the spill BP formed a new risk management and safety unit that reports directly to the CEO and is responsible for ensuring that “all operations are carried out to common standards and for auditing compliance with those standards” (McDonald 19). Prior to the BP oil spill there was little internal auditing for compliance standards, which could have potentially lessened the negative impact of the spill, since much of the blame went to faulty equipment.
Effective risk management helps protect companies from negligence and could have helped BP lessen the damages and have less financial responsibility in the form of damages. BP created a $20 billion compensation fund in order to settle cases through federal litigation (Feinberg).
The risk management that BP has implemented has been reactive and not proactive. In the future the risk management and safety unit should help BP more proactively identify risks and ensure they are abiding by compliancy standards. BP and Alumina are both large organizations that were accused of negligent acts that caused damages to third parties and the environment. BP negligence caused scenarios where the legal ramifications were loss of income to many people in the gulf region that were involved in the tourism and fishery industry. The other legal issue was wrongful death involving families of people that were killed in the accident.
BP and Alumina were both accused of negligence causing harm to the environment. The management of BP has faced criticism for not being forth-coming in the aftermath of the accident. Alumina and BP both settled in lieu of costly litigation and a public relations nightmare. BP incorporated a public relations strategy and spent money on commercials to inform the public that responsibility is being taken and the company is not abandoning the region.
Cheeseman, H. R. (2010). Business law: Legal environment, online commerce, business
ethics, and international issues (7th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
Houck, O. (2010). Oil HYPERLINK "http://search.ebscohost.com.ezproxy.apollolibrary.com/login.aspx?direct=true&db=f5h&AN=51652144&site=ehost-live"&HYPERLINK "http://search.ebscohost.com.ezproxy.apollolibrary.com/login.aspx?direct=true&db=f5h&AN=51652144&site=ehost-live" accountability: Who will pay to fix Louisiana? Nation, 291(2), 11-14. Retrieved Online from http://web.ebscohost.com.ezproxy.apollolibrary.com/ehost/detail?sid=5037cd31-640d-4271-bc6f-20a56aa8a0e1%40sessionmgr11HYPERLINK "http://web.ebscohost.com.ezproxy.apollolibrary.com/ehost/detail?sid=5037cd31-640d-4271-bc6f-20a56aa8a0e1%40sessionmgr11&vid=1&hid=10&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d"&HYPERLINK "http://web.ebscohost.com.ezproxy.apollolibrary.com/ehost/detail?sid=5037cd31-640d-4271-bc6f-20a56aa8a0e1%40sessionmgr11&vid=1&hid=10&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d"vid=1HYPERLINK "http://web.ebscohost.com.ezproxy.apollolibrary.com/ehost/detail?sid=5037cd31