Value of Damage Caused by BP Oil Spill

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An Arizona State University researcher has worked on a project that determined the cost of damage done by the BP Oil Spill in 2010 to natural assets that don’t have a market price. Kerry Smith will talk about his report, which estimates $17.2 Billion in damages.

TED SIMONS: THE B.P. OIL SPILL IN 2010 CAUSED BILLIONS OF DOLLARS WORTH OF DAMAGE, BUT HOW TO PUT A PRICE ON THE DAMAGE TO NATURAL ASSETS THAT DON'T HAVE A MARKET PRICE. OUR NEXT GUEST, KERRY SMITH, WAS PART OF A RESEARCH PROJECT THAT ATTEMPTED TO DO JUST THAT. WELCOME TO "ARIZONA HORIZON." GOOD TO HAVE YOU.

KERRY SMITH: THANK YOU.

TED SIMONS: THIS WAS LIKE OVER 87 DAYS, A LOT OF OIL.

KERRY SMITH: A LOT OF OIL. THE LARGEST MARITIME OIL SPILL IN U.S. HISTORY, 134,000,000-GALLONS.

TED SIMONS: AND HOW MUCH DAMAGE NOW DO WE KNOW IN TERMS YOU CAN PUT A PRICE ON THINGS? HOW MUCH DAMAGE?

KERRY SMITH: WE ESTIMATED A TEAM WORKING FOR THE NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION AS PART OF A DAMAGE ASSESSMENT AS PART OF THE POLLUTION ACT ESTIMATED $7.2 BILLION AS THE AMOUNT HOUSEHOLDS WOULD PAY TO PREVENT ANOTHER OIL SPILL LIKE THIS ONE IN THE GULF.

TED SIMONS: THAT'S AN INTERESTING METRIC BECAUSE THAT INCLUDES THINGS YOU CAN'T PUT A PRICE ON. PEOPLE ARE PUTTING A PRICE ON IT THEMSELVES, CORRECT?

KERRY SMITH: THAT'S CORRECT. THAT'S EXACTLY RIGHT.

TED SIMONS: BY WAY OF A TAX?

KERRY SMITH: WELL, WHAT WE SUGGESTED TO INDIVIDUALS IS THAT THEY WOULD BE TAXED IN A ONE-TIME TAX TO DEVELOP A PLAN THAT WOULD PREVENT AN OIL SPILL JUST LIKE THE GULF SPILL AND SO THAT TAX WAS VARIED RANDOMLY ACROSS HOUSEHOLDS IN THE UNITED STATES THAT WERE PART OF OUR SURVEY, 3,600 OR SO HOUSEHOLDS WERE PART OF OUR SURVEY.

TED SIMONS: AND FOR THOSE WHO KIND OF POOH POOH THIS IDEA, NO ONE IS GOING TO BE WILLING TO PAY A TAX FOR SOMETHING LIKE THIS. WE HAVE SOME VISUALS SOME SHOTS OF THE SPILL ITSELF, FIRE. THERE'S THE FIRE WHICH YOU KNOW IS TERRIBLE TO SEE. AND AS FAR AS THE SPILL IS CONCERNED AND THE DAMAGE DONE ON THE COASTLINES AND THE IMPACT WE HAVE A MAP COMING UP HERE SHORTLY OF THE IMPACT OF THE DAMAGE. I MEAN WHEN YOU WERE DOWN THERE, YOU ARE WILLING TO PAY $153 TO KEEP THIS FROM HAPPENING AGAIN.

KERRY SMITH: THAT'S RIGHT. THAT'S EXACTLY RIGHT. THESE HOUSEHOLDS ARE CLEARLY WILLING TO PAY THAT AMOUNT OF MONEY. RESPONSES THAT HOUSEHOLDS GAVE US TO THE SURVEY ARE COMPLETELY CONSISTENT WITH THE TYPES OF DECISIONS THEY WOULD MAKE WITH PURCHASES IN ORDINARY PURCHASES OF GOODS AND SERVICES. WHAT'S DIFFERENT IN THIS CASE IS PEOPLE MAY NOT EVEN BE USING THE GULF, AND THEY WANT TO PROTECT IT. THAT'S WHAT'S IMPORTANT ABOUT THIS STUDY.

TED SIMONS: NOW, THE DISSENT DECREE ON ALL OF THIS. YOU KNOW YOU DON'T TAKE ANY RESPONSIBILITY FOR THIS BUT YOU AGREE TO PAY X,Y AND Z INCLUDED $9 BILLION FOR NATURAL RESOURCE DAMAGE. ACCORDING TO YOUR RESEARCH, THAT'S LIKE HALF OF WHAT THEY PROBABLY SHOULD HAVE PAID.

KERRY SMITH: IT'S SMALLER THAN WHAT THEY SHOULD HAVE PAID, THAT'S CORRECT. NOW THEY ALSO PAID A TOTAL INCLUDING THE $8.8 OF ABOUT $20.8 BILLION IN CLEAN UP COSTS AND PAYMENT TO STATES FOR LOSSES THAT THE STATES MAY HAVE INCURRED AND THIS DOES NOT INCLUDE THE PAYMENTS THEY MADE TO HOTELS AND COMMERCIAL ENTITIES THAT ALSO LOST BECAUSE OF THE SPILL.

TED SIMONS: BUT THAT $9 BILLION WAS SPECIFIED FOR NATURAL RESOURCE DAMAGES AND AGAIN FROM AN INTERESTING POINT OF VIEW, YOU KINDA CAME AROUND THE OTHER AREA AND SAID THAT DAMAGE WAS MUCH MORE THAN $9 BILLION.

KERRY SMITH: WE SAID THAT PEOPLE WOULD BE WILLING TO PAY MUCH MORE THAN $9 BILLION.

TED SIMONS: THAT'S THE MARKET. THE MARKET SPOKE.

KERRY SMITH: THIS IS RIGHT. THE ASSETS ARE WORTH A LOT MORE THAN $9 BILLION.

TED SIMONS: HAS THIS KIND OF RESEARCH BEEN DONE ON THIS KIND OF A THING BEFORE?

KERRY SMITH: WELL, UNDER THE OIL POLLUTION ACT OF 1990, AND LEGISLATION PRIOR TO THIS, IT IS REQUIRED THAT IF OIL IS RELEASED INTO THE NATURAL ENVIRONMENT THAT THESE KINDS OF ASSESSMENTS BE DONE. SO FOR EXAMPLE, THERE WAS AN ASSESSMENT DONE FOR THE EXXON VALDEZ OIL SPILL AND THERE HAVE BEEN OTHER ASSESSMENTS, NOT ON THIS SCALE BECAUSE THIS WAS THE LARGEST OF THE MARITIME OIL SPILLS.

TED SIMONS: ARE THESE PARTICULAR ASSESSMENTS. DO THEY HOLD UP? I MEAN DO THEY HOLD UP IN COURT? DO THEY HOLD UP IN AGREEMENTS AND ARBITRATION?

KERRY SMITH: THEY HOLD UP IN AGREEMENTS AND ARBITRATION. VERY FEW EVER GO TO COURT. SO THE EXXON SURVEY AND THE RESULTS FROM THAT, THAT WAS ALSO PART OF A FEDERAL SETTLEMENT. MOST OF THESE ARE SETTLED BEFORE GOING TO COURT.

TED SIMONS: ALL RIGHT. SO AGAIN, THIS WAS IN THE GULF OF MEXICO, 134,000,000-GALLONS SPILLED BACK IN 2010. JUST HORRIFIC DAMAGE. AS FAR AS YOUR RESEARCH IS CONCERNED. AND AGAIN, WHEN WE LOOK AT THIS MAP, IT'S HARD TO IMAGINE JUST HOW MUCH OIL THAT IS, THE ABSOLUTE NATURE OF THIS. DOES SOMETHING LIKE THIS, HOW DOES IT AFFECT THE REAL WORLD? ARE THE OIL COMPANIES PAYING ATTENTION TO THIS KIND OF RESEARCH?

KERRY SMITH: I THINK THEY ARE, YES. THEY'RE BEGINNING WITH THE EXXON VALDEZ OIL SPILL. THIS WAS AN AREA THAT WAS NOT HEARD OF BY OIL COMPANIES AND NOW THEY HAVE EXPERTS ON THEIR STAFF TO EVALUATE THESE KIND OF DECISIONS, TO EVALUATE THIS KIND OF ANALYSIS AND TO TAKE SERIOUSLY THE MEASURES THAT THEY NEED TO TAKE TO PROTECT THE PUBLIC FROM THESE KIND OF SPILLS. SO IT IS HAVING A DIFFERENCE.

TED SIMONS: AND HOW DID YOU GET INVOLVED IN THIS PARTICULAR STUDY?

KERRY SMITH: I HAVE BEEN WORKING IN THIS AREA FOR NEARLY 50 YEARS.

TED SIMONS: MY GOODNESS.

KERRY SMITH: NOT ON OIL SPILLS BUT IN THE CONTEXT OF VALUING THE ENVIRONMENT AND TAKING ACCOUNT OF PEOPLE'S VALUES, EVEN THOUGH THEY MIGHT NOT USE IT BUT CARE ABOUT IT.

TED SIMONS: AND TO FIND OUT HOW MUCH THEY CARE ABOUT IT.

KERRY SMITH: WE DESIGNED THE SURVEYS. THAT'S RIGHT.

TED SIMONS: IT'S REALLY FASCINATING STUFF. GOOD TO HAVE YOU HERE. THANKS FOR JOINING US.

KERRY SMITH: THANK YOU VERY MUCH. THANKS FOR HAVING ME.

TED SIMONS: COMING UP TUESDAY ON "ARIZONA HORIZON," AN UPDATE ON THE TEMPE STREETCAR PROJECT, WHICH JUST RECEIVED $50 MILLION DOLLARS IN FEDERAL FUNDING. AND WE'LL HEAR WHAT FOLKS IN WICKENBURG THINK ABOUT A PROPOSED INTERSTATE THAT COULD RUN RIGHT THROUGH THEIR TOWN. THAT'S AT 5:30 AND 10:00 ON THE NEXT "ARIZONA HORIZON. " THAT IS IT FOR NOW. I'M TED SIMONS. THANK YOU SO MUCH FOR JOINING US. YOU HAVE A GREAT EVENING.

Kerry Smith: ASU Researcher

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