The explosion of the Deepwater Horizon oil rig in the Gulf of Mexico on April 20 has ballooned into an environmental and economic issue of extreme importance. What was at first reported as one of the worst oil drilling accidents of the last 50 years has evolved into an economic and environmental disaster that may dwarf the Exxon Valdez spill. An oil slick, currently larger than the state of Rhode Island, amoebas towards the United States coast, along the way wreaking havoc on the sea life in its path, releasing toxic chemicals into the air, and changing the political debate on offshore drilling. At risk are wetlands that serve as a buffer against storms, sea creatures that fishermen depend on for their livelihoods, energy prices that were softening in the current market, and tourism along the Gulf Coast.
Here's a quick five-point primer on understanding what happened based on an aggregation of news reports. Please click on the individual links included below from The New York Times, LA Times, NPR, Bloomberg, Business Insurance, Politico, the AP, and others for in-depth explanations.
5. What Happened? On April 20th, a drilling rig contracted to oil giant BP blew up while exploratory drilling in 5,000-feet of water in the Macondo prospect, 50 miles off the Lousiana coast. Eleven of the 126 workers on the rig went missing and are presumed dead. It was unclear what caused the explosion, but experts think there was an accidental ignition of natural gas or oil. BP's chairman recently said the explosion occurred because of faulty equipment, after accusations the company's safety record suggested negligence. Initial reports a day after the explosion indicated environmental damage appeared minimal. Then, the rig went from leaning at a 10-degree angle to sinking two days after the explosion.
4. The Immediate Economics: The slick grew as experts discovered three leaks spewing an estimated 5,000 barrels of oil into the Gulf a day. The coming economic and environmental cost morphed into something frightening. Economic estimates put the current damage over $1 billion. Much of the money to address that damage may come from the $1.6 billion government reserve meant to clean up oil spills. The government taxes oil companies 8 cents a barrel, and that money helps build up the reserve. The offshore oil rig company is responsible for up to $75 million in liability. The government can go after BP for cleanup costs. As of May 1, 36 lawsuits were filed by beachfront property owners, fishermen, and others who will be directly affected by the spill. Consumers across the country may see a spike in seafood prices in local supermarkets.