The oil and gas industry, a global behemoth, is divided into three sectors: upstream (exploration and extraction of oil and gas), midstream (transportation, storage, and marketing of oil and gas), and downstream (conversion or refining of oil and gas to finished products). Each sector has unique risks for the hiding of environmental and safety liabilities.
One key area that has well documented hidden liabilities is part of the upstream sector: offshore drilling. As of January 2018, there were more than 1,200 active offshore drilling rigs in the world, with 175 rigs in the U.S. waters off the Gulf of Mexico. Other notable offshore fields are found in the North Sea, the Campos and Santos Basins off the coast of Brazil, and off the West African coasts of Nigeria and Angola, along with Southeast Asia, Russia, and Canada. Although these offshore drilling rigs cost more to construct and maintain than land drilling, they produce much more oil per day. The deep-water wells have the capacity to produce over 50,000 barrels of oil each day, and operations are costly and hazardous to workers and the environment.
This increased capacity is also accompanied by significant environmental threats. Offshore drilling not only pollutes the oceans and harms the marine ecosystem, but it also pollutes the air, intensifying the effects on climate change. Furthermore, as more and more offshore drilling occurs, the companies increase the risks by drilling in ultra-deep waters (depth of 5,000 feet or more). By 2017, more than 52% of US oil production was from ultra-deep wells. Drilling at these depths offers the opportunity to access untapped reserves, but greatly increases the risk of environmental harms and comes with a much smaller margin of error.
One analysis of oil and gas production found that the probability of a serious accident, fatality, injury, explosion, or fire grows by 8.5 percent with every additional 100 feet of depth at which an offshore platform operates, regardless of age or the quantity of fuel produced. The depths also complicate measures to handle problems when they do occur. In the event of a spill, it’s much harder to control and clean up for the ultra-deep rigs.
Given the enormous pressures to minimize costs and the fact that much of the work is beyond the scrutiny of casual observers, there is a high risk that environmental and worker safety violations will be concealed.
Environmental Impacts of Offshore Drilling
One of the most notable oil spills is Deepwater Horizon. In April 2010, the Deepwater Horizon drilling rig exploded and sank while drilling an exploration well for British Petroleum (“BP”) in the Gulf of Mexico. Eleven people lost their lives, and the rig spilled 134 million gallons of oil into the Gulf of Mexico over a period of 87 days, fouling 1,300 miles of shoreline along five states. This spill is considered the largest offshore oil spill in the U.S., and second largest in the world.
The Deepwater Horizon oil spill alone has killed as many as 102,000 birds, 167,000 sea turtles, thousands of sea mammals, and uncountable number of fish. The effects of the Deepwater Horizon spill remain, despite clean up efforts. Oil pollution has been detected in thousands of fish in the Gulf, including seafood. Furthermore, this spill has affected the local communities where many residents of the coast have lost income and business, and some residents have reported suffering from post-traumatic disorder, even years after the spill. Learn more about the spill here.
There are other offshore oil spills that have led to the destruction of the marine life ecosystem, including one that remained unnoticed for years. Taylor Energy Co. Oil Platform 23051 is located on the U.S. waters of the Gulf of Mexico, 12 miles off the Louisiana coast and few miles south to where the Deepwater Horizon spill occurred. In 2004, this oil-production platform sank due to a mudslide triggered by Hurricane Ivan, and it began spilling 300 -700 barrels of oil per day. This spill was kept secret by the Taylor Energy Company for six years until 2010, when it was discovered by others during the attempts to resolve the Deepwater Horizon oil spill nearby. It is estimated to have spilled between 855,421 and 3,991,963 gallons of oil by 2017. The U.S. Coast Guard has stated that the spill finally was contained in .
Key Whistleblower Tools
Whistleblowers with knowledge of fraud in connection with oil and gas companies’ hiding of environmental and safety liabilities have a host of powerful laws available to them. In order to mitigate the dangers of oil spills and gas emissions in the oceans, the International Convention for the Prevention of Pollution from Ships (MARPOL) was adopted in 1983. The convention includes regulations aimed at preventing and minimizing pollution from ships — both accidental pollution and that from routine operations. MARPOL regulates the prevention of pollution by oil and other spills caused by ships, including mobile oil rigs and oil tankers.
The U.S. adopted MARPOL into its Act to Prevent Pollution from Ships (APPS), which makes it a criminal offense for any person to knowingly violate MARPOL, APPS, or the federal regulations promulgated under APPS. These regulations apply to all commercial vessels, including deep water rigs. A unique aspect of APPS is that the only violation necessary to be found under APPS is the knowing act of maintaining false statements in the vessel’s mandatory records of its spills and discharges of oil and other materials under MARPOL.
Whistleblowers, who typically are crewmembers on the vessels and rigs, play a key role in APPS enforcement efforts by providing evidence of dumping of oil and waste products from drilling into the ocean without proper disclosure on the vessel’s record books. Under APPS, whistleblowers are eligible for a monetary reward of up to 50% of the monetary sanctions that the U.S. government receives from the guilty parties. APPS has been incredibly effective since it was signed into law: the U.S. courts have awarded 205 whistleblowers a sum of approximately $33 million in the 100 most recent prosecutions under APPS, and whistleblowers were responsible for 76% of all successful cases from 1993 – 2017.
Another U.S. law that can be used against toxic pollution from offshore rigs is the Dodd-Frank Act. The Dodd-Frank Act was enacted to improve accountability and transparency in the financial system in the wake of the 2008 financial crisis. The Act created a confidential whistleblower program administered by the Securities and Exchange Commission (SEC), providing financial rewards to whistleblowers who bring original information to SEC on the publicly traded company’s SEC violations, including false statements made by a publicly traded company to its shareholders and to the public. The SEC Whistleblower Program has been a highly successful program. Over the past decade, it has led to over US$1.7 billion in total monetary sanctions from wrongdoers as a result of whistleblower tips, with over US$326 million awarded to 59 individual whistleblowers.
Whistleblower laws are complex, and it is recommended that whistleblowers consult with a qualified attorney before acting on any information about potential wrongdoing. Through its Legal Assistance Program, the National Whistleblower Center helps connect would-be whistleblowers to attorneys specializing in whistleblower law.
Confidentially Report Fraud
Do any of the above types of fraud look familiar? Do you think you’ve witnessed, or you know of another kind of fraud not mentioned here? You could have a whistleblower case.
Providing legal assistance to whistleblowers is a top priority of the National Whistleblower Center (NWC). NWC’s Legal Assistance Program (LAP) helps whistleblowers exercise their rights in three ways. Through the LAP, NWC educates and trains potential whistleblowers; assists them in finding a whistleblower attorney; and supports high-impact whistleblower litigation.
NWC works with an independent public interest law firm, the National Whistleblower Legal Defense and Education Fund (“Fund”), which provides a secure intake form that allows whistleblowers to submit basic information about their case on a confidential basis.
Potential whistleblowers looking for a whistleblower attorney are encouraged to submit their concerns to the Fund’s intake site. Once submitted, the intake form will be reviewed by a highly qualified whistleblower attorney, who may make one of several recommendations.