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The real costs of oil

By Darryl D'Monte

The recent Mumbai oil spill ought to serve as a wake-up call to the authorities on the reckless manner in which the country is building and maintaining its ports. In Mumbai, the outdated MbPT was to have made way for the modern JNPT on the mainland, but MbPT is hanging on to its 1800 acres of prime real estate, exposing the city to the threat of more oil spills and hazardous chemicals

The full ramifications of the collision involving the Panama-registered ship Chitra and St Kitts-registered Khalijia III – both employing flags of convenience, to avoid stricter surveillance – just outside Mumbai harbour are beginning to unravel. It is clear that human error was responsible, considering that the accident took place in broad daylight, with reasonable visibility, even during the monsoon. The ships were operating on different radio frequencies, the Chitra on VHF 13 as it left the Jawaharlal Nehru Port Trust (JNPT) in Navi Mumbai while the Khalijia was on VHF 12 at it approached  the Mumbai Port Trust (MbPT) on the island city. It was literally a case of non-communication, which is forbidden by navigational rules on the common channel used by both ports, two of the country’s largest and busiest. This was compounded by the absence of a pilot on the Chitra, who is understood to have disembarked earlier than he should have.

The authorities are also completely at sea in dealing with a tragedy of this magnitude. There are also too many different agencies involved, with little or no coordination between them. The Coast Guard is ill-equipped, both with vessels and devices to keep the oil and highly toxic chemicals at bay. This is why experts from Rotterdam and Singapore had to be flown in, though by international standards, the leaks are not that large. The Maharashtra Pollution Control Board is similarly manned by generalists, for the most part, and does not have the technical expertise to advise on how to tackle an oil spill. The National Environmental Engineering Institute, which is based in Nagpur but has a Mumbai office, is better placed to deal with the marine pollution.

An expert from The Energy & Resources Institute (TERI) in Delhi has offered the Pollution Control Board what in scientific parlance is known as ‘bio-remediation’, which takes several forms. In this specific case, it consists of bacteria which can gobble oil, though the delay of a few days may already have resulted in the oil slick spreading too far and wide for this technique to be employed effectively. This technique is appropriately nicknamed ‘Oilzapper’. The bacteria, which can be easily cultured in a laboratory, can consume oil, release carbon dioxide in the process and then turn into harmless organisms themselves which can be eaten by fish. The method is 10 years old so far as oil leaks on land are concerned. Last year, TERI collaborated with Adelaide University in Australia and has come up with a variant for the sea. It has been tested around Australia and may well work around Mumbai and elsewhere in this country.

Some 880 tonnes of oil are estimated to have spilled from the Chitra and spread over 20 sq km, including the area around the vessel and coastline. According to Dr Banwari Lal, a TERI Director, the sludge that has settled on beaches can be treated easily with local bio-remediation sites. Presumably, this is more labour- than capital-intensive, though the various Mumbai authorities are already complaining of a shortage of manpower. Large pits have to be dug, lined with high-density polythene, the contaminated sand scooped and filled in these pits and large amounts of bacteria dumped on these.

A different ‘cocktail’ of microbes has to be employed at sea, but TERI claims that its zapper works even more effectively here because it breaks down compounds faster and can withstand salinity. In fact, Dr Lal estimates that the polluted sea can be cleaned within a month, which seems a somewhat tall order. Just to provide one comparison, the worst oil spill in US waters till BP’s Deepwater Horizon explosion in April was the Exxon Valdez oil tanker in Alaska in 1989. Admittedly, a far huger amount of oil leaked – 10 million tonnes, affecting 1,200 miles in ecologically pristine Alaska. However, only 8% of the oil was salvaged by the company and till today, there are traces of oil in Prince William Sound, where the accident occurred.

The environmental impact of the Mumbai spill may be both immediate and long-lasting. The first casualty will be marine life, which is why Environment Minister Jairam Ramesh himself has suggested that fishing boats should not venture out before August 15, which is a diplomatic way of suggesting that people should not consume fish and crustaceans for some time. This will adversely affect the livelihoods of Mumbai’s “oldest profession”. As it happens, many devout Mumbaikars are also observing Shravan at this time and abstain from non-vegeterian fare. But the monsoon is also the breeding season for fish, and the oil and chemicals will play havoc with life in shallow coastal waters. Mangroves will also be affected in the long run, particularly the younger plants which may be covered in oil. As is increasingly becoming apparent, mangroves are the first line of defence against a rising tide – particularly in an era of climate change – and they also serve as breeding grounds for a wide spectrum of marine life.

The Mumbai accident ought to serve as a wake-up call to the authorities regarding the reckless manner in which the country is building ports, including private ports like the industrialist Adani’s in Gujarat, without proper precautionary mechanisms in place. In Mumbai specifically, the MbPT, which has a shallow depth of only some 10 metres as an old facility, was to have gradually made way for JNPT, a modern and much larger port on the mainland. Only JNPT can handle large container vessels, many of which are now landing up along the coast and are interfering with the navigation channel after Chitra started to tilt at a precarious angle, tipping several of its containers with hazardous cargo into the water.  

The irony is that MbPT is part of history and should now be phased out. It had its heyday during the East India Co and British Raj when it handled much of the trade. Nowadays, however, much of the imports are not meant for Mumbai and its environs at all. The goods are simply sent by truck out to the hinterland and even distant states; the same is true, in the reverse direction, of exports. This only adds considerably to congestion in an already heavily overcrowded city. So depleted are the operations of the MbPT that many of its warehouses and other areas have been let out to private companies which have nothing to do with maritime trade. What is more, MbPT occupies 1,800 acres of prime real estate in the island city, three times the area of the city’s controversial mill lands, and could be redeveloped as a recreation and housing hub. Of course, the needs of the few thousand remaining dock workers have to be accommodated, but many of the world’s cities have seen a makeover of their docklands, London in particular.

The accident should also remind us of the hazards of transporting oil, although neither of the vessels in this case involved tankers. Due to lax regulations in and around Mumbai port, vessels regularly let their oily bilge and other wastes out into the ocean, which is strictly forbidden in advanced countries. Some of the beaches which are now reporting oil slicks around Mumbai, like Gorai to the north of Greater Mumbai and Alibag and Kihim to the east on the mainland, regularly face this nuisance, albeit to a much smaller extent.

It will be instructive to see how the Maharashtra government handles the compensation to be paid. Apart from the clean-up, there will be huge losses because of the temporary closure of the navigation channel into both MbPT and JNPT, with several ships waiting to deliver their cargo or leave after doing so.  Presumably, insurance companies will pick up at least some of the actual damage to the Khalijia, while Chitra looks like a write-off. Considering that there are scores of ports being built on the west and east coast of the country, such accidents are only likely to occur with increasing frequency unless ships adhere to the rules.

Unfortunately, only the immediate commercial losses and part of the clean-up costs may be recovered by shippers and the state respectively. There will be no price tag put to environmental damage, although these may well outweigh these immediate costs in the long run, particularly the harm to marine life. Such was the public outrage in the US against BP in the Deepwater Horizon case, partly because it took place in the Gulf of Mexico -- where the entire country had been incensed by President George W Bush’s crass negligence over the damage caused by Hurricane Katrina -- that President Obama was forced to act against the company. It has announced a $20 billion oil response fund, to be paid in phases. This includes environmental damage, costs borne by government or NGOs, but not for fines or penalties which any court will decide upon. As now-deposed BP CEO Tony Hayward stated, "We are taking full responsibility for the spill and we will clean it up and where people can present legitimate claims for damages we will honour them. We are going to be very, very aggressive in all of that.” There are some 160 law suits filed against BP already.

In the case of Exxon Valdez, the Oil Spill Trustee Council estimated that 250,000 seabirds, 2,800 otters, 300 seals, 250 bald eagles (which figure on US stamps and other official insignia), 22 killer whales and billions of salmon and herring eggs were decimated by the spill. The state actually priced each seagull at $167, eagles at $22,000, seals at $700 and killer whales at $300,000. Exxon's top official in Alaska told locals dependent on the ruined fishing industry, "We will do whatever it takes to keep you whole. We do business straight."

The litigation against Valdez is revealing and may have some bearing on Deepwater. Initially, a jury awarded $287 million in actual damages and $5 billion for punitive damages, which was equivalent to a year’s profit of Exxon at the time. On appeal, a judge reduced the damages to $4 billion in 2002, a good 13 years later, during President Bush’s era of laxity towards the petroleum industry. After appeals, a judge reduced it to $2.5 billion in punitive damages in 2006. Two years later, however, a judge vacated the judgement and sent the case back to a lower court, arguing that the damages were excessive in relation to maritime common law. He argued that Exxon's actions were deemed "worse than negligent but less than malicious” and limited the damages to $507.5 million, a denouement which is reminiscent of the litigation over the Bhopal gas tragedy.

Exxon’s position was that punitive damages greater than $25 million were not justified because the spill resulted from an accident, and because the company had spent an estimated $2 billion cleaning up the spill and a further $1 billion to settle related civil and criminal charges. The company recovered a significant portion of clean-up and legal expenses through insurance claims. In 1991, Exxon made a separate financial settlement of damages with a group of seafood producers for the disaster's effect on the Alaska’s seafood industry. The agreement granted $63.75 million to the group, but stipulated that it would have to repay almost all of any punitive damages awarded in other civil proceedings. The $5 billion in punitive damages was awarded later, and the group’s share could have been as high as $750 million if the damages award had held.

All this should serve as a warning to those who transport and handle oil in this country. In time, as the world becomes more globalised and India’s maritime trade increases, it will have to adhere by international shipping rules and pay the price in the eventuality of an accident. Unfortunately, instead of phasing itself out, the MbPT is hell-bent on expanding it activities. It has built a long jetty deeper into the ocean, specifically to handle “bulk liquid cargo”, which includes oil. By not surrendering the dock area for redevelopment, MbPT has not only deprived Mumbai of precious land – at present each Mumbaikar has to make do with just 1 sq metre of open space, which must be the tiniest in the entire world – but its surroundings will be increasingly exposed to spills of oil and hazardous chemicals.

After Deepwater, critics are also pointing to the real costs of using oil, apart from the obvious one of greenhouse gas emissions which cause global warming and the congestion caused by excessive reliance on private motorised transport. The fact is that the petroleum industry is heavily subsidised, unknown to the public, by the state. In 1987, the New York Times published an editorial titled  ‘The Real Cost of Gas: $5 a Gallon’. At the time, when Americans paid 99 cents per gallon, and even the energy crises of the 1970s did not push gas prices above $1.50 per gallon, $5 was unimaginable. Yet the Times editorial stated that, "in light of the administration's willingness to risk lives and dollars in the defense of oil from the Persian Gulf… the real cost of oil should include the cost of the military forces protecting supplies." It argued for an energy policy that accounted for Pentagon expenditures. Two Gulf wars later, these costs have risen considerably.

Infochange News & Features, August 2010