Because HFO is the waste product of the refinery process, it is a relatively inexpensive fuel. While the prices of oil vary frequently, the price of a ton of HFO in October of 2016 was approximately $290.00 USD, while a ton of distillate fuel was $516.00 USD.[1]
However, when considering the price of HFO it is critical to incorporate the environmental consequences and the costs of responding to an HFO spill. The 2002 Prestige oil spill that affected Spain, France and Portugal as well as the 2004 Selengang Ayu spill in Unalaska Island are good examples of the true cost of using HFO (see below).
Prestige Oil Spill
In 2002, the tanker Prestige, which was carrying 77,000 tons of HFO as cargo, suffered hull damage off the coast of northern Spain.[2] The spilled oil drifted for an extended period, and as a result of shifting winds and currents, the oil stranded along the coastlines of Portugal, Spain and France.[3] Thousands of boats took part in the cleanup attempts but the effort was widely unsuccessful due to severe weather and the emulsification of the spilled HFO.[4] The onshore cleanup effort involved the participation of over 5,000 military, local government personnel, contractors and volunteers but was complicated by rocky coastlines.[5] Unfortunately, despite serious attempts to collect the spilled oil, extensive contamination of ocean and coastal habitats types occurred.
After the spill, studies calculated that the total mortality of seabirds was between 150,000 and 250,000.[6] In addition, the spilled oil either directly or indirectly impacted between 707 and 914 cetaceans, other sea mammals and sea turtles.[7] Direct impacts of the HFO spill included death by oiling and the indirect impacts included species being forced to relocate to seek alternative feeding and habitation sites.
In addition to the severe environmental consequences of the Prestige HFO spill, the economic costs were also immense and have not yet been finalized. The current total estimated cost of the Prestige oil spill is a little over Euros three billion and includes the following costs:[8]
- Total losses for the fishing industry of the northern Spanish and Basque coasts for the period 2002-2006 = Euros 296.26 million
- Total losses for the tourist industry (north Spain and Basque coasts) 2002-2006 = Euros 718.78 million
- “Extra costs” in the maritime transportation sector in Galicia and North Spain for 2003: Euros 5.38 million
- Shoreline cleaning in Galicia and North Spain for 2002-2003: Euros 834.40 million
- Public administration costs in Galicia and North Spain including community support/compensation, pollution monitoring, research, and “image restoration:” Euros 1.189 billion
Total Estimated Costs of the Prestige Oil Spill = Euros 3.042 billion[9]
*Many of the environmental damages remain quantified and the French and Portuguese claims are not included in this estimate. It is highly likely that the totality of compensation claims will not be settled for several years.
Selengang Ayu Oil Spill
In 2004, the Malaysian bulk carrier Selendang Ayu suffered engine failure, drifted for about 2 to 3 days, and eventually ran aground several hundred yards offshore of Skan Bay, Unalaska Island, Alaska. When the vessel ultimately broke in two, approximately 1,200 tonnes of bunker fuel spilled into the sea.[10] Because of winter weather conditions, oil response efforts were not able to commence until the following spring.[11] The spill site was also located far away (nearly 1,000 km) from major infrastructure, and shorelines were only accessible by air or sea.[12] In addition, cold temperatures and harsh sea conditions caused the spilled oil to emulsify,[13] which caused the volume, viscosity and weight of the spilled oil to significantly increase.
Although the total volume of oil spilled in the Selendang Ayu oil spill was comparatively small, the oil had serious impacts on the surrounding ecosystems. Not only did the oil cover over 86 miles (138 kms) of shoreline along the Unalaska island coast,[14] but the oil was transported to inter- and sub-tidal sediment habitats including sand, shingle and rocky beaches, vegetated shorelines, estuarine and freshwater habitats.[15] Shoreline cleaning continued for two years and was eventually terminated late summer/early autumn of 2006.
Despite significant cleanup efforts, studies estimate that between 4000 to 200,000 seabirds were killed,[16] and sea otters, sea lions and seals were observed swimming in, or surfacing through, oil slicks in the Selendang Ayu spill impact area.[17] In addition, shellfish and crustacean species were physically oiled[18] and crab and other fisheries in the Makushin/Skan Bay area were closed by the Alaska Department of Fish and Game (ADF&G) on December 27, 2004 due to spill concerns.[19]
In 2007 the State of Alaska and the operators of the Selendang Ayu reached a financial settlement in the amount of 112 million USD with respect of damages relating to the spilled oil.[20] These costs included:
- Formalized Response: Over 100 million USD
- Criminal Penalties (fines): 9 million USD
- Clean-Up Costs to the State of Alaska: 2.5 million USD
- Payments Towards Oil Spill Wreck Removal and Lost Taxes (fishing): 844,707 USD
- Beach Monitoring: 36,000 USD
Total Estimated Costs of the Selengang Ayu Oil Spill = 112 million USD[21]
Given the immense environmental consequences and costs associated with both the Prestige oil spill and the Selengang Ayu oil spill, it is evident that when considering the relative price of HFO and distillate fuel, it is critical to consider the environmental and economic costs associated with oil spills.
[1] Ship and Bunker Prices, October 18, 2016, available at http://shipandbunker.com/prices/av.
[2] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 9 (2016).
[3] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 9 (2016).
[4] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 9 (2016).
[5] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 10 (2016).
[6] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 11 (2016).
[7] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 12 (2016).
[8] Loureiro, Maria et al., Socioeconomic and environmental impacts of the Prestige oil spill in Spain, University of Santiago de Compostella (2009).
[9] Loureiro, Maria et al., Socioeconomic and environmental impacts of the Prestige oil spill in Spain, University of Santiago de Compostella (2009).
[10] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 21 (2016).
[11] National Resource Damage Assessment Plan for the MV Selendang Ayu Oil Spill, page ES-1, Draft Final, (2015).
[12] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 23 (2016).
[13] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 22 (2016).
[14] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 21 (2016).
[15] The Selendang Ayu Oil Spill: Lessons Learned,” Conference Proceedings. August 16- 19, 2005, Unalaska, Alaska. Reid Brewer, Editor. Published by: Alaska Sea Grant College Program. University of Alaska Fairbanks AK-SG.
[16] Hlady. D.A. et al., Drift Block Experiments to Analyse the Mortality of Oiled Seabirds of Vancouver Island, 26 Mar. Poll. Bull. 9, 495-501 (1993).
[17] Deere-Jones, Lost Treasure: Long Term Environmental Impacts of the Sea Empress Oil Spill, Chapter Six, Friends of the Earth Ltd, ISBN 1 85750 276, at 43 (1996).
[18] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 23 (2016).
[19] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 23 (2016).
[20] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 24 (2016).
[21] Deere-Jones, T., Ecological, Economic and Social Impacts of Marine/Coastal Spills of Fuel Oils (Refinery Residuals), at 24 (2016).