As cleanup costs and lawsuits pile up from businesses affected by the oil spill off Orange County, questions are mounting over whether the pipeline’s owner will be able to pay all the bills.
When asked, Houston-based Amplify Energy – which emerged from bankruptcy four years ago – says it’s committed to its responsibilities for cleanup and regulatory requirements, including following federal rules for insurance coverage.
But the company declined last week to say whether it has enough coverage for all of the spill costs.
And in past disclosures to investors, Amplify has said it can’t promise its insurance would cover all of its liabilities.
“We can provide no assurance that our coverage will adequately protect us against liability from all potential consequences, damages and losses,” the company wrote in its most recent annual 10-K report last December, before the spill.
After the Refugio oil spill off Santa Barbara in 2015, its owner declared bankruptcy in an effort to eliminate about $1 billion of debt linked in part to the pipeline’s closure.
Offshore drilling companies are supposed to provide financial assurances about their ability to clean up spills and decommission their equipment, in filings with the U.S. Department of Interior.
Voice of OC asked the three lead federal agencies that oversee offshore drilling what those financial assurances were for the pipeline that leaked.
The agencies wouldn’t say what that exact dollar amount is.
But after being asked multiple times by Voice of OC, a spokesman for one of the agencies – known as BOEM – pointed to documents indicating pipelines like the one that leaked are required to have a minimum of $35 million available for spills.
Taxpayers deserve to know how much has been set aside to clean up after spills, said Michael Robinson-Dorn, a law professor at UC Irvine who directs its Environmental Law Clinic.
“I think there’s no question that the regulators and the American public should know exactly how much money has been set aside, so the American taxpayer and the federal government do not wind up holding the bag and having to pay for these costs,” Robinson-Dorn told Voice of OC on Wednesday.
The federal Government Accountability Office has raised concerns about federal requirements for how much offshore drillers have to set aside for liability, finding in 2017 that regulators required less than 10% of the actual costs of decommissioning be available through bonds.
And last week, local members of Congress said taxpayers are at risk of having to pay to clean up spills and decommissioning for the small companies that now own rigs and often go bankrupt.
“I think it’s very important to reinforce that taxpayers don’t get stuck with the bill, when it comes to the cleanup and when it comes to the decommissioning,” said Rep. Mike Levin (D-San Juan Capistrano).
Amplify Energy is now facing multiple lawsuits over the spill, which impacted wildlife and businesses up and down the Orange County coast.
Oil companies are responsible to pay for spill impacts regardless of whether they’re at fault – known as “strict liability,” county Supervisor Katrina Foley said at a news conference after the spill.
One class-action suit, led by Huntington Beach resident Peter Moses Gutierrez Jr., alleges he’s lost a “substantial amount” of his business DJ’ing events along the beach, along with harm to over 100 other individuals.
That suit alone – filed by the Milberg law firm – claims total damages of over $5 million.
Another class-action lawsuit – filed by commercial boat captains, coastal residents and the chairman of the Newport Beach Chamber of Commerce – alleges major damages from the spill
“The California Department of Fish and Wildlife has closed offshore fisheries indefinitely while they conduct testing. Lobster fishermen are unable to bait and trap lobster for the short harvesting season which was set to begin on October 6, 2021,” the suit states.
“Many fishers and trappers have lost significant revenue because they have not been able to collect any of the fish or shellfish in their already-set traps.”
The suit was filed by Wylie Aitken, a founding partner of the Aitken, Aitken and Cohn law firm and Board of Directors Chair for the Voice of OC, and seeks to represent everyone who suffered financial losses from the spill.
Additional lawsuits could be on their way from local cities and the county government.
The City Council in Huntington Beach, which depends heavily on its tourism and recreation, has authorized their city attorney to sue over the spill, after the city had to close their beaches and cancelled the largest airshow in the region.
And Orange County supervisors also have authorized litigation from the county over the spill, according to Foley.
The lawsuits come as local members of Congress question taxpayer subsidies of oil companies like Amplify – something they say keeps these drilling rigs running even when they’re not profitable.
Rep. Katie Porter (D-Irvine) said at a hearing last week that Amplify was paid nearly $20 million in federal subsidies because their well isn’t as profitable – something she said needs to stop.
“It turns out [Beta Operating] got nearly $20 million from the federal government – specifically because the oil wells are at their end of their lives and are not producing much oil, which makes them less profitable,” said Porter.
“So taxpayers are being asked to pay to encourage oil production in the Pacific Ocean, and giving oil companies millions of dollars to do it,” she said.
Beta’s parent company, Amplify Energy, did a major stock buyback just before receiving a $5.5 million payroll subsidy from the federal government, in the form of a Paycheck Protection Program loan that the government forgave.
“These subsidies are, in fact, a waste of taxpayer dollars,” Porter said.
Nick Gerda covers county government for Voice of OC. You can contact him at ngerda@voiceofoc.org.