Webinar on financial responsibility for oil industry

On Wednesday, Feb. 20, Friends of the San Juans along with Washington Conservation Action, Re Sources, Mt. Baker Group of Sierra Club, Skagit Audubon, and Communities for a Healthy Bay hosted a webinar detailing the Washington State Department of Ecology’s (DOE) proposed rulemaking on holding oil industry facilities financially accountable for oil spills and their related damages. The webinar featured two presentations outlining the drastic insufficiency of the proposed financial responsibility requirement and unpacking the externalized costs the oil industry avoids, concluding with tips and guidance on providing effective testimony at the upcoming online hearings hosted by the DOE.

Beginning with an introduction by the webinar’s moderator, WA Conservation Action’s Puget Sound Senior Campaign Manager Rein Atteman explained that despite the improvements in the state’s oil spill prevention preparedness and response efforts, facilities like oil refineries, marine terminals and pipelines (known as class one facilities) have yet to be issued a financial responsibility requirement whereas vessels have had these requirements for the last 20 years.

As a result of a collective effort among environmental organizations and state legislators who helped pass legislation in Olympia back in 2022, DOE has been directed to adopt rules wherein “regulated entities must demonstrate financial responsibility for response, clean up costs and as necessary, compensate the state and affected federally recognized Indian tribes, counties and cities for damages that might occur during spill,” according to the proposed DOE legislation.

However, the financial responsibility requirement proposed by DOE for these class one facilities would be greatly inadequate in covering the damages of an oil spill. Lovel Pratt, Marine Protection Policy Director at Friends of the San Juans, went into greater depth on this issue in her presentation, explaining the origins of the proposed $300 million maximum financial responsibility requirement by DOE.

According to Pratt, this amount is based on a 1993 study that identified oil spill response and damage costs at $12,500 – $18,900 per barrel, vastly underestimating costs of damage per barrel in today’s dollar values. Pratt cited that the cost of the spill response and damage for the 2010 tar sands crude oil spill into the Kalamazoo River was over $1.2 billion, or $60,153 per barrel. Additionally, Pratt cited a 2006 study conducted by the DOE which identified that a large oil spill could cost the state $10.8 billion and 165,000 jobs. The proposed $300 million financial responsibility requirement would cover only 1/36 of this estimate.

After pointing out that the $300 million requirement for class one facilities is the same amount that is currently required for passenger vessels with a fuel capacity of at least 6000 gallons, Pratt and the hosts of the webinar took a firm stance that these class one facilities should have the same financial responsibility requirement of $1 billion that tank vessels and barges currently comply with.

Following Pratt’s portion of the webinar, co-chair of the Mount Baker Group of the Sierra Club Rick Edgar gave the second presentation on externalized costs of the oil industry. Before retiring from law, Edgar litigated cases brought by the oil industry during the 1990s against the insurance industry, affording him expertise in Big Oil and their financial capacity.

“During the course of [the DOE’s] rulemaking process, DOE has succumbed to claims by members of the petroleum industry that having to obtain insurance for more than $300 million in annual coverage is either impossible or too expensive,” said Edgar. “This makes little sense as one who has litigated against major players in the oil industry. I know they spend extraordinary amounts every year on their insurance coverage, and have more in the budget if needed.”

Edgar claimed that the oil industry is treated like a charity case, not only from the nearly $20 billion of government subsidies given to the industry annually, but the far bigger and less apparent subsidy of externalized costs. Externalized costs are an indirect cost or benefit to an involved third party that arises as an effect of another party’s activity. As Edgar put it, “externalized costs are simply those generated by any industry, but paid for by society.”

Throughout his presentation, Edgar cited different findings that quantify these externalized costs produced by the oil industry, such as a study on pollutants from Gulf oil and gas combustion conducted by Harvard researchers which found that just the combustion of oil and gas products cause 8.7 million premature deaths annually. He also mentioned that the International Monetary Fund estimated that the license to pollute is a $5.4 trillion annual subsidy worldwide; roughly $646 billion dollars in the US annually.

“If society must bear the burden and harm of the externalized costs that make the oil industry so incredibly profitable, then…[DOE] must require the industry to do what is necessary to assure that financial resources are ready and waiting to pay for the costs of containing, cleaning up and compensating for any industry created oil spill, large or small,” said Edgar.

With upcoming virtual hearings hosted by the DOE on the proposed legislation, the webinar concluded with guidance on providing testimony from Eddy Ury, the Climate and Energy Policy Manager at Re Sources, and Katie Titus, Senior Organizer with Native Vote Washington. Ury stated that although there is no one way to testify, he recommends that speakers start off by introducing themselves and give any kind of credentials or affiliations, regardless of whether they are directly related to the issue, to create context and personalize the testimony. Ury mentioned that it is important to name specific problems within the legislature, all while remaining gracious and polite to DOE for hearing out the community.

Lastly, Ury recommended that testimonies be concise, around two minutes, and encouraged reading from a written testimony, which can be sumbitted as a written comment as well. The webinar concluded with an example testimony delivered by Titus on the Exxon Valdez oil spill, which released 11 million gallons of crude oil into the Prince William Sound and how its effects rippled throughout the native communities within Alaska, even reaching her community 350 miles away from the Sound.

The hearings will be held on Feb. 27 at 1:00 p.m., Feb. 28 at 6:00 p.m., and Feb. 29 at 10 a.m. Links for the hearings can be found at https://sanjuans.org/ensuring-accountability-proposed-regulations-for-oil-handling-facilities/#45d fa1dc-418c-4576-9de0-d780ca1702d5. For those unable to attend the hearings, written comments can be submitted to the DOE at https://sppr.ecology.commentinput.com/?id=Njtx23iVBu by March 8.