CHAPTER ONE

Introduction

Hydrocarbon extraction generates economic benefits and environmental risks. The environmental risks of offshore hydrocarbon extraction were made readily apparent on April 20, 2010, when the Deepwater Horizon (DWH) platform drilling the Macondo well in Mississippi Canyon Block 252 (MC-252) exploded. In the aftermath of the explosion, an estimated 4.9 million barrels1 (>200 million gallons) of crude oil spilled into the Gulf of Mexico (GoM) over a period of 3 months, resulting in the largest marine oil spill and environmental response in U.S. history (Lubchenco et al., 2012; McNutt et al., 2012).

During the time since the spill (more than 3 years at the time this report went to press), numerous commissions, committees, and panels have focused on the causes of the explosion, reviewed the immediate response procedures, and offered suggestions for changes in practice, policy, and regulatory regimes to help minimize the likelihood that a disaster like the DWH oil spill could happen again (IOM, 2010; National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, 2011; NRC, 2011). In addition, the academic research community, private sector, and federal government have embarked on a range of studies aimed at understanding the impacts of the spill on the environment, economy, and people of the GoM region (NOAA, 2012c).

The spill also triggered a legal process—the Natural Resource Damage Assessment (NRDA)—to assess the “injury” (defined as the observable or measurable adverse change in a natural resource or impairment of a natural resource service), to develop, implement, and monitor restoration plans, and to establish compensation for the costs of assessment and restoration from those deemed responsible for the injury (NOAA, 2012b). The ultimate goal of the compensation and restoration process is to “make the environment and public whole.”2 The application of NRDA to oil spills is authorized under the Oil Pollution Act of 1990, legislation that was created partly in response to an earlier environmental disaster, the 1989 Exxon Valdez oil spill in Prince William Sound, Alaska.

The procedures for implementation of the NRDA process were developed based on experience from spills that, at the time, had been of limited volume and had been constrained to relatively shallow waters. Under typical NRDA practice, losses are generally measured in simple ecological terms (e.g., number of acres damaged or number of fish killed), and restoration generally follows relatively simple equivalency approaches (e.g., acres of habitat restored or fish stocks replaced). For some situations, sufficient pre-spill baseline data exist and the oil spill is relatively minor, and thus assessment of impact can be straightforward (e.g., the income lost from the closure of a particular fishery) and compensation easily determined. However, for

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1 According to McNutt et al. (2012), BP’s containment efforts captured approximately 800,000 barrels of oil before it reached the marine environment, making the total amount of oil to enter the water column closer to 4.2 million barrels.

2 15 C.F.R. § 990.30 (2012).



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CHAPTER ONE Introduction Hydrocarbon extraction generates economic benefits and environmental risks. The environmental risks of offshore hydrocarbon extraction were made readily apparent on April 20, 2010, when the Deepwater Horizon (DWH) platform drilling the Macondo well in Missis- sippi Canyon Block 252 (MC-252) exploded. In the aftermath of the explosion, an estimated 4.9 million barrels1 (>200 million gallons) of crude oil spilled into the Gulf of Mexico (GoM) over a period of 3 months, resulting in the largest marine oil spill and environmental response in U.S. history (Lubchenco et al., 2012; McNutt et al., 2012). During the time since the spill (more than 3 years at the time this report went to press), numerous commissions, committees, and panels have focused on the causes of the explosion, reviewed the immediate response procedures, and offered suggestions for changes in practice, policy, and regulatory regimes to help minimize the likelihood that a disaster like the DWH oil spill could happen again (IOM, 2010; National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, 2011; NRC, 2011). In addition, the academic research community, private sector, and federal government have embarked on a range of studies aimed at under- standing the impacts of the spill on the environment, economy, and people of the GoM region (NOAA, 2012c). The spill also triggered a legal process—the Natural Resource Damage Assessment (NRDA)—to assess the “injury” (defined as the observable or measurable adverse change in a natural resource or impairment of a natural resource service), to develop, implement, and monitor restoration plans, and to establish compensation for the costs of assessment and restoration from those deemed responsible for the injury (NOAA, 2012b). The ultimate goal of the compensation and restoration process is to “make the environment and public whole.”2 The application of NRDA to oil spills is authorized under the Oil Pollution Act of 1990, legislation that was created partly in response to an earlier environmental disaster, the 1989 Exxon Valdez oil spill in Prince William Sound, Alaska. The procedures for implementation of the NRDA process were developed based on experience from spills that, at the time, had been of limited volume and had been constrained to relatively shallow waters. Under typical NRDA practice, losses are generally measured in simple ecological terms (e.g., number of acres damaged or number of fish killed), and restora- tion generally follows relatively simple equivalency approaches (e.g., acres of habitat restored or fish stocks replaced). For some situations, sufficient pre-spill baseline data exist and the oil spill is relatively minor, and thus assessment of impact can be straightforward (e.g., the income lost from the closure of a particular fishery) and compensation easily determined. However, for 1  According to McNutt et al. (2012), BP’s containment efforts captured approximately 800,000 barrels of oil before it reached the marine environment, making the total amount of oil to enter the water column closer to 4.2 million barrels. 2  15 C.F.R. § 990.30 (2012). 13

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A S S E S S I N G T H E I M PA C T S O F T H E D E E P WAT E R H O R I Z O N O I L S P I L L many other situations, the complex interconnections of the ecosystem are not well understood, and thus quantification of the full impact of the spill on all components of the ecosystem may be difficult, if not impossible. Challenges to the assessment of damages under NRDA increase with the spatial and temporal scale of the injury and the complexity of the ecosystems in- volved, which makes it more difficult to understand and account for the full range of ecological and societal impacts. Quantification of the level of injury is further complicated when an event occurs in an ecosystem that is subject to natural and anthropogenic environmental changes that are unrelated to the specific event. In these cases, the injury caused by a specific spill must be assessed relative to dynamic or shifting baseline data. The DWH oil spill was a large-scale event with impacts in the entire water column, from deep to shallow, and in open waters to coastal marshes and beaches. The ecology of the GoM system is complex and incompletely understood. It is a highly dynamic system, with a number of natural and human processes causing changes that result in a constantly shifting baseline. All of these conditions make attribution of injury and recovery planning challenging. The interconnected nature of the coastal and marine ecosystems in the GoM makes it difficult to isolate injury to a single resource or single ecosystem process. Impacts tend to spread through the system because of physical processes, such as currents that spread oil from place to place, and biological processes that carry pollutants through the food chain and, as with migrating waterfowl, potentially cause effects far from the site of the oil spill. In addition, an understanding of social and economic processes is needed to determine how biophysical changes in ecosystems translate to injury to various segments of the public. Consequently, understanding of highly complex interconnected systems such as the GoM requires a more holistic view of ecosystems and the role of the people within them. Two concepts articulate this more holistic view: ecosystem-based management and ecosystem services. Ecosystem-based management accounts for the complexity of interac- tions within an ecosystem (including those involving humans) rather than focusing on single resources or species in isolation (Christensen et al., 1996). It is a central element in the recently released National Ocean Policy Implementation Plan3 as well as an evolving theme in current fisheries management efforts in the United States (Sissenwine and Murawski, 2004). Ecosystem services are the benefits that the public receives from natural resources and the ecological processes provided by ecosystems (Daily, 1997; MEA, 2005). Ecosystem services are produced as a result of the normal functioning of the ecosystem— the interactions of plants, animals, and microbes with the environment. Ecosystem services include provisioning services (the material goods provided by ecosystems, including food, feed, fuel, and fiber), regulating services (climate regulation, flood control, and water purification), cultural services (recreational, spiritual, and aesthetic), and supporting services (nutrient cycling, primary production, and soil formation). These services have immense value to society and are essential to the well-being of all people. The GoM provides a broad array of provisioning, regulating, supporting, and cultural ecosystem services. Coastal tourism (a cultural service), for example, has an estimated worth 3  http://www.boem.gov/NOP/. 14

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Introduction of $19.7 billion per year (National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, 2011). The wetlands and marshes of the Gulf region play a critical role in storm surge protection (a regulating service) as well as nutrient cycling and water purification (supporting services) and commercial fisheries landings (a provisioning service), which account for approximately 25 percent of the seafood provided by the contiguous United States (NMFS, 2010b). Additionally, the people of the GoM region and the nation as a whole benefit from the vast hydrocarbon resources of the GoM, which, in 2009, accounted for 29 percent of the total crude oil and 13 percent of the natural gas production in the United States (DOE, 2010). The evolving understanding of human–ecosystem interactions, which is shaped by the concepts of ecosystem-based management and particularly ecosystem services, offers an opportunity to address some of the challenges inherent in assessing the impacts of an event such as the DWH oil spill. By taking a more holistic view of ecosystem interactions and then following these interactions through all relevant trophic levels and spatial connections to their ultimate impact on human well-being, an ecosystem services approach to damage assessment enables formation of a more complete picture of potential impacts and a broader range of restoration options. This is particularly relevant to a spill the size, duration, depth, and complex- ity of the DWH oil spill, during which oil and dispersants were released at 1,500-m depth into a relatively poorly understood deep-sea ecosystem that includes deep-sea corals and chemosyn- thetic communities (organisms that derive their energy from oxidizing inorganic molecules). Oil, dispersants, and dispersed oil then traversed through the water column, interacting with fish, marine mammals, and other organisms throughout the trophic web, making their way through the photic zone, and sometimes reaching beaches and salt marshes. All of this occurred in a region that has been subject to numerous other natural disasters (e.g., hurricanes) and human actions (e.g., levee construction for flood control, fertilizer applica- tion) that have created dynamic baselines from which to estimate the impact of the spill. Never before has the United States faced a spill of this magnitude or with the potential to impact all trophic levels of such a complex and dynamic ecosystem. To quantify the spill’s impact we must first understand the interactions and linkages between and among the various components and processes (including human) of this ecosystem. Recognizing these unique and unprec- edented aspects of the DWH oil spill and the associated complexity of the task of assessing damages, Congress requested that the National Academy of Sciences evaluate the effects of the DWH oil spill on the ecosystem services of the GoM. A committee was established in Janu- ary 2011 and charged with addressing the questions posed in the following Statement of Task: Statement of Task 1. What methods are available for identifying and quantifying various ecosystem ser- vices? What are the spatial and temporal scales conducive to research that provide meaningful information for the public and decision makers? 2. What methods and types of information can be used to approximate baselines (but- for-the-spill) for distinguishing effects on ecosystem services specific to the spill? 15

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A S S E S S I N G T H E I M PA C T S O F T H E D E E P WAT E R H O R I Z O N O I L S P I L L 3. What kinds of valuation methods are appropriate for measuring ecosystem services over time with regard to recovery under the following approaches: natural processes, mitigation, and restoration efforts? What baseline measures are available that would provide benchmarks for recovery and restoration efforts? 4. What ecosystem services (provisioning, supporting, regulating, and cultural services) were provided in the Gulf of Mexico Large Marine Ecosystem prior to the oil spill? How do these differ among the subregions of the Gulf of Mexico? 5. In general terms, how did the spill affect each of these services, and what is known about potential long-term impacts given the other stresses, such as coastal wetland loss, on the Gulf ecosystem? 6. How do spill response technologies (e.g., dispersant use, coastal berm construction, absorbent booms, in situ burning) affect ecosystem services, taking into account the relative effectiveness of these techniques in removing or reducing the impacts of spilled oil? 7. In light of the multiple stresses on the Gulf of Mexico ecosystem, what practical approaches can managers take to restore and increase the resiliency of ecosystem services to future events such as the Deepwater Horizon Mississippi Canyon-252 spill? How can the increase in ecosystem resiliency be measured? 8. What long-term research activities and observational systems are needed to under- stand, monitor, and value trends and variations in ecosystem services and to allow the calculation of indices to compare with benchmark levels as recovery goals for ecosys- tem services in the Gulf of Mexico? Sixteen committee members were selected, representing a broad range of backgrounds and expertise (ecology, geology, geophysics, microbiology, fisheries, veterinary medicine, economics, environmental law, environmental engineering, biological oceanography, marine chemistry, biochemistry, human dimensions of natural resource management, and benthic and coastal habitats). Beginning with its initial meeting in late January 2011, the committee held six meetings and public information-gathering sessions. The committee was charged with produc- ing an Interim Report (NRC, 2011) and this Final Report. The Interim Report focused primarily on the first three tasks and was designed to offer early guidance to federal agencies involved in the NRDA and restoration efforts. To address these tasks, the Interim Report provided an overview of the unique physiographic, oceano- graphic, and ecological components of the GoM and the range of habitats that make up its ecosystem. It then introduced the concept of ecosystem services and an “ecosystem services approach” for estimating the impact of an event such as the DWH oil spill, contrasting this approach with the current NRDA process and its use of habitat or resource equivalency as a means to “make the environment and the public whole.” Designed to overcome the challenges involved in estimating harm to natural resources, the equivalency approaches have become, in effect, surrogates for estimating how to make the environment and the public whole. By and large, they focus on estimating the implicit value of an injured habitat or organism rather than on its ultimate value to people. Consequently, equivalency approaches may not sufficiently ad- 16

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Introduction dress the human dimension (at least in a quantitative manner) and may underestimate longer- term impacts. For these reasons, equivalency approaches can fall short of making the public whole. In contrast, an ecosystem services approach accommodates the human dimension. In addition, on the ecological side, an ecosystem services approach may expand the array of pos- sible restoration projects by designing novel ways (independent of lost habitats or resources) to restore the loss of ecosystem services. The critical question of what it really means to make the environment and the public whole (and the tradeoffs associated with these actions) is further addressed in Chapters 2 and 3 of this Final Report. The Interim Report also introduced approaches for establishing the baseline measure- ments needed to understand the damages caused by the spill and highlighted key parameters that have been or should be measured in the GoM to understand the state of the ecosystems, and the services they provided, before the DWH oil spill. As explained in this Final Report, depending on the ecosystem service being addressed, there are vast differences in the amount and quality of data available. This fact, combined with the dynamic (and already degraded) nature of many of the ecosystems in the GoM, renders the establishment of pre-spill baseline levels one of the major challenges to any approach to damage assessment. The final chapter of the Interim Report explored the process of estimating the impact of an event such as the DWH oil spill on several ecosystem components (wetlands and fisher- ies) through the use of ecological production functions (models that capture the mechanics of how changes in ecosystem parameters impact ecosystem services), and then it discussed economic approaches (market and nonmarket) to quantifying the monetary value of the ecosystem service. The Interim Report offered specific illustrative examples of several types of measurements that would augment and complement standard NRDA measurements and would facilitate application of an ecosystem services approach to estimating the impact of the spill. In closing, the Interim Report acknowledged that, although it offers great potential for more complete and realistic estimates of both short- and long-term impacts of an event such as the DWH oil spill, the ecosystem services approach is still very early in its development and faces many challenges to its implementation, the most serious of which is the lack of compre- hensive ecosystem models. Since the Interim Report was released, the analyses of thousands of additional samples have been completed, enhancing understanding of the spill’s impact on various components of the GoM ecosystem. The results of many of these analyses are still not public because the NRDA process is ongoing and the studies have not been closed, but peer-reviewed publica- tions are beginning to appear, which has allowed the committee to arrive at a clearer and better-documented picture of some of the short-term impacts of the spill. In addition, a greater understanding of the nature of ecosystem services in the GoM has evolved. Therefore, to ad- dress the first two committee tasks, Chapter 2 of this report revisits the concept of ecosystem services and explores in more detail the challenges to implementing an ecosystem services ap- proach to damage assessment, specifically: (1) shifting or dynamic baselines in the GoM, (2) the lack of complete or validated ecosystem models that capture the full complexity of ecosystem interactions in the GoM, and (3) understanding the tradeoffs between restoration options to 17

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A S S E S S I N G T H E I M PA C T S O F T H E D E E P WAT E R H O R I Z O N O I L S P I L L make the public whole. Each of these challenges is significant, yet the committee reaffirms its conclusion that an ecosystem services approach has much to offer. Chapter 3 addresses the concept of resilience (the capacity of a system to rebound from disturbances) in the context of ecosystem services and outlines the challenges faced by man- agers in attempting to restore or increase the resilience of the ecosystem services in the GoM (Task 7 of the Statement of Task). Consideration of resilience can provide a useful framework for the management of complex systems such as the GoM, an area prone to major disturbances such as hurricanes, which is especially relevant when the goal is to maintain the provision of valuable ecosystem services. However, resilience can be difficult to measure, and implemen- tation of resilience-based management strategies may be impeded by potential legislative barriers. Chapter 4 offers a comprehensive overview of the response technologies used during and after the DWH oil spill. The magnitude, scale, and depth of the spill necessitated the use of many response technologies at scales never before attempted, including the application of 1.8 million gallons of chemical dispersants (Federal Interagency Solutions Group, 2010) at the sur- face and at 1,500-m depth. The chapter examines the technologies’ effectiveness, limitations, and potential impacts on GoM ecosystem services (Task 6). In this context, Chapter 4 explores the concept of using Net Environmental Benefit Analysis and “influence diagrams” to evaluate the risks versus the benefits of using different technologies. To bring the discussion of GoM ecosystem services into focus, Chapter 5 expands on the information provided in the Interim Report regarding the specific ecosystem services provided by the GoM (and thus addresses Tasks 1 through 5). The chapter characterizes ecosystem services within a geospatial context and describes how ecosystem services vary as a function of scale and in response to changes in physical and environmental setting. Four case studies (wetlands, fisheries, marine mammals, and the deep sea) outline some of the documented im- pacts of the DWH oil spill on GoM ecosystem services, provide examples of how an ecosystems approach may be applied to damage assessment, and discuss the opportunities and chal- lenges inherent in such an approach. The case studies reflect a range of conditions with respect to the amount and utility of available data, our fundamental understanding of the functioning of the ecosystem subcomponents, the values of the services in market and nonmarket terms, and the range of the spill’s impacts on the services. For each case study, the committee identi- fies key ecosystem services, considers how they may have been impacted by the DWH oil spill, examines methods for making baseline measurements, and explores the adequacy of exist- ing baseline data for the GoM. Additionally, the committee offers suggestions for additional measurements that can enhance an ecosystem services approach to damage assessment. As such, they serve as exemplars of how an ecosystem services approach can add to our ability to capture the full impact of an event such as the DWH oil spill and, at the same time, illustrate the challenges faced while attempting this approach. The Interim Report and this Final Report identify many areas for which data collection or a fundamental understanding of system processes are lacking, highlighting the need for ad- ditional research to take full advantage of the potential that an ecosystem services approach offers for damage assessment in the GoM. Chapter 6 reviews the post-spill actions that led to a 18

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Introduction series of legislative directives regarding response activities and a remarkable level of increased funding aimed at GoM-related research and restoration to address gaps in knowledge and/or data. The DWH oil spill focused national and international attention on the environmental implications of a deep-water drilling accident. The magnitude, depth, and breadth of the spill challenged all those responsible for responding and providing for restoration. New approaches were developed “on the fly” (Lubchenco et al., 2012). Additional new approaches may be needed to fully understand the impacts and to make the environment and the public whole. Drilling in the deep GoM started in 1975, yet our understanding of the GoM ecosystem is still not at a level where the impact of an accident on the people of the region, and perhaps the nation, can be predicted. The last catastrophic spill, the Exxon Valdez spill of 1989, prompted the Oil Pollution Act, which was intended to address many of the important issues raised by that spill. The DWH oil spill differs in many important aspects from the Exxon Valdez spill (e.g., the Exxon Valdez spill originated from a tanker in shallow water and impacted coastal and rocky beaches in a cold environment). Many of the lessons learned from a spill in that environment are not necessarily applicable to a spill in the deep GoM environment. Lessons learned from the DWH oil spill may eventually work their way into new legislation. Perhaps more forward- thinking systematic actions could put society in a better position to react the next time a disas- ter strikes. The committee hopes that this broader message has been heard and that this report can, in some way, contribute to new efforts focused on developing the appropriate levels of understanding and suites of tools needed before the next disaster occurs. 19

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