Last month, we saw a drilling rig in the Gulf of Mexico go up in flames. You may not have heard about it, though, because that rig was drilling for natural gas, so the threat of environmental damage was much smaller than that for oil. While it can be difficult to put a figure to the environmental damage from an oil spill, we try to assign some monetary value as though the dollars spent can compensate for the damage it does. Today, we as a society have become less tolerant of spills, and the costs a company can incur are becoming very prohibitive.
A recent oil sands spill from a pipeline in Michigan operated by Enbridge Energy Partners (NYSE:EEP) has resulted in cleanup costs of $830 million, or about $41,000 per barrel spilled. This figure is much higher than the cleanup costs for the Deepwater Horizon, which averaged about $3,200 per barrel spilled. What Enbridge should also be frightened of is any litigation that may arise from this spill. When all of the cleanup, lawsuits, development funds, and litigation is complete for the Deepwater Horizon spill, BP (NYSE:BP) could end up spending as much as $96 billion.
The risk of an oil spill can come from a wide range of areas -- well blowouts, bad weather, misread navigation charts, or military action. There are several factors to consider that will also determine the total cost of the spill. The seven largest oil spills to ever happen, as shown in the following slideshow, serve as a hefty reminder that the threat of oil spills are very real and the costs for these spills can cripple a company for years.
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