TED Case Studies


Shetland Oil Spill


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           CASE NUMBER:         230  
           CASE MNEMONIC:       SHETLAND
           CASE NAME:           Shetland Oil Spill

A.         IDENTIFICATION

1.         The Issue

This case deals with the damage done to the environment on and
around the Shetland Islands, Scotland, which is part of the
United Kingdom.  It also deals with the threat to the fishing and
tourism trade done by the islanders.  The light crude oil that
was spilled by the Liberian-registered, U.S. owned, oil tanker
Braer could have had a devastating effect on the environment, and
thus on the trade industry of these small islands.  However,
large-scale damage was avoided by the rough action of the ocean
which helped to break up the spill (in fact, an oil slick never
had a chance to develop).  The legal portion of this case centers
around the insurance of the Braer company and compensating the
islanders who were affected by the spill:

     "Under U.K. law, which accords with the 1969 Civil
     Liability Convention (CLC), the liability limit for
     owners of the Braer could be $8 million for pollution
     damage, including cleanup costs...Further compensation
     for spill victims could also be available from the
     International Oil Pollution Compensation Fund,
     established in 1971, so that $82 million could be
     available in all" ("Braer Crude Oil Tanker Splits as
     Weather Hinders Containment," Oil & Gas Journal, 18
     January 1993, p. 27.)

2.   Description

This case involves the oil spill off the Shetland Islands, which
are a group of islands located off the northern shore of
Scotland, United Kingdom.  On 5 January 1993 the
Liberian-registered, U.S. owned oil tanker Braer ran aground off
the southern tip of the Shetlands when it could not restart its
engines after they became flooded with seawater.  The Braer was
"owned and operated by Braer Corp., in turn owned by B&H
Shipping, Stamford, Conn." ("Tanker Spills Norwegian Crude Oil
Off Shetlands," Oil & Gas Journal, 11 January 1993, p. 26.).  It
was insured by Skuld Protection & Indemnity, Oslo, Norway.

The oil spill threatened the populations of seabirds, salmon,
sea-trout, gray seals, otters, and other species on and around
the islands.  A few days after the spill occured a fine mist with
particles of oil drifted over the islands and actually left an
oily residue on the island's sheep.  However, it was determined
"that the level of air pollution after the spill was extremely
low despite the oily mist" (NOTE:  "Shetland Oil Spill Did Little
Harm," New Scientist, 26 June 1993, p. 8.).

On 12 January the tanker proceeded to break up into three
sections after it was continually thrown against the rocks of the
island.  The entire cargo of 85,000 tons (620,000 barrels) of
Norwegian light crude headed for Canada spilled into the sea
around the southern end of the main Shetland Island.  "The $11
million shipment was destined for Ultramar Canada Inc.'s 125,000
b/d refinery at St. Romuald, Que." ("Tanker Spills Norwegian
Crude Oil Off Shetlands," Oil & Gas Journal, 11 January 1993, p.
26.).  None of the oil could be recovered from the tanker while
it was aground because of the high winds (up to 100 mph) and the
rough seas.

The choppy water turned out to be a help rather than a hinderance
because it prevented an oil slick from forming on the surface,
and it broke up the spill quickly.  According to one report
"around 30 percent of the oil has been deposited in the sediments
of two basins...[t]his oil will slowly break down..." ("Shetland
Oil Spill Did Little Harm," New Scientist, 26 June 1993, p. 8.). 
The spill was aided by chemical dispersants dropped on it by
British planes.  "[T]hey (the dispersants) break the oil into
globules that sink below the surface, and so help to save sea
birds from the immediate danger of oiling" ("The Wreck of the
Braer," Economist, 9 January 1993, p. 50.).

At first, it looked as if this oil spill would be on par (in
terms of damage) with the wreck of the Exxon Valdez in 1989. 
However, the accident turned out to be relatively harmless even
though it was the twelfth largest spill in history ("A Disaster
That Wasn't," Discover, January 1994, p. 69.).  The damage to the
wildlife was as follows:

     "The official death tolls -- the number of carasses
     recovered -- included 1,542 seabirds, several thousand
     pounds of commercially farmed salmon, 10 gray seals,
     and 4 otters.  Two of the otters were run over by a
     camera crew covering the spill, however, and the other
     two probably died of old age" (Ibid.).

Quite clearly the damage could have been much worse.    A year
after the incident occured there is no glaring sign that the oil
spill even happened.  Except for shellfish in a very limited
area, all official restrictions on seafood originating from the
Shetlands have been removed.  "[F]inancial losses from pollution
damage had been largely compensated by the International Oil
Pollution Fund and the ship's insurers, and commercial activities
were relatively back to normal" ("Lucky Braer Escape Leaves No
Room for Complacency," Lloyds List, 4 January 1994).  
    The question of indirect losses in tourism, transport,
environment, fisheries, and aquaculture have yet to be settle
completely.  The media coverage of the event is said to have
negatively affected tourism to the Shetlands and the marketing of
products from there.  A study of these indirect losses should be
released soon, then another meeting with the insurers will be
held to obtain futher compensation.

3.  Related Cases

     SALMON case
     CANCOD case
     UKCOD case
     EXXON case
     TURBOT case
     SELLA case
     ECUADORT case
     DONUT case

     Keyword Clusters

     (1): Product                   = OIL
     (2): Bio-geography             = OCEAN
     (3): Environmental Problem     = Species Loss Sea [SPLS]

4.   Draft Author:  Scott A. Kocher

B.   Legal Filters

5.   Discourse and Status: AGRee and INPROPGress

There is agreement "[u]nder U.K. law, which accords with the 1969
Civil Liability Convention (CLC), the liability limit for owners
of the Braer could be $8 million for pollution damage, including
cleanup costs" (Braer Crude Oil Tanker Splits as Weather Hinders
Containment," Oil & Gas Journal, 18 January 1993, p. 27.).  There
is also agreement that victims of the resulting damage of a spill
should be compensated from the International Oil Pollution
Compensation Fund.  However, there are more studies being done to
determine further compensation; the results of these studies
should be released soon.

The reasoning behind the given value (2.6) is because the first
payment of compensation to those effected by the spill has
already gone out.  However, there is another round of
compensation payment under review.  As for the ban on seafood
from the islands, it has been lifted with the exception of
shellfish.

6.   Forum and Scope:  UK and UNILateral

7.   Decision Breadth:  1

8.   Legal Standing: LAW

C.   Geographic Filters

9.   Geography

    a.  Geographic Domain:  Europe
    b.  Geographic Site:    Northern Europe
    c.  Geographic Impact:  Shetland Islands, United Kingdom

10.  Sub-National Factors: YES

The decision to clean-up the spill and to compensate the victims
may have come at a national level, but the results of these
actions will be applied locally in the Shetlands.

12.  Type of Habitat:  COOL

IV.  TRADE CLUSTER

13.  Type of Measure:  Export Ban [EXBAN]

There was a ban placed on seafood coming from the Shetland
Islands after the oil spill occured.  However, "[n]early all the
restrictions imposed on seafood have been lifted, with only
shellfish in a limited area still subject to official bans"
("Lucky Braer Escape Leaves No Room for Complacency, Lloyds List,
4 January 1994.)

14.  Direct vs. Indirect Impacts: DIRect

The ban on seafood was placed directly on the product for health
safety reasons.

15.  Relation of Trade Measures to Resource Impact

    a.  Directly Related to Product:    Yes
    b.  Indirectly Related to Product:  No
    c.  Not Related to Product:  No
    d.  Related to Process:      Yes  Species Loss Sea [SPLS]

16.  Trade Product Identification: SALMON and OIL

17.  Economic Data

It is estimated that the Shetland Islands will lose 18.2 million
pounds in tourism by the year 2000 ("The Tainted Isles Come
Clean," Scotsman, 5 January 1994, p. 8.).  The loss is due to
tourists being afraid that the oil spill has permanently damaged
the environment of the islands, which is not the case.  The
Shetlands lost 1.3 million pounds in lost bookings in 1993 and
another 1.3 million pounds if travel costs are included (NOTE: 
Ibid.).  "To rectify the damage we still need 4 million pounds,
and we need it now"  (Ibid.).

18.  Impact of Trade Restriction: HIGH

Environmentalists believe that a combination of aging shipping
fleets and single-lined hulls could lead to future disasters. 
They promote the use of double-hulls to help prevent spills. 
However, the oil industry counters this by saying that every ton
of steel used to construct another hull on new ships is one less
ton of oil which the ship will be able to transport.

19.  Industry Sector:  FOOD and OILGAS

In the Shetland Islands case, the tourism sector is probably more
important because almost all of the restrictions on fish have
been lifted.  People from the islands have noted that tourism was
down last year; citing the oil spill as the main reason why. 
There are not many alternatives to the jobs people have on these
small islands and tourism trade is absolutely vital to their
economic well-being.

20.  Exporter and Importer: UK and MANY

V.   ENVIRONMENT CLUSTER

21.  Environment Problem Type:  Pollution Sea[POLS]

22.  Species

Among the species which were affected: salmon, sea-trout, 
puffins, sand-eels, lugworms, ans shellfish.

     Name:           Cod
     Type:           Animal/Vertibrate/Fish/Bony
     Diversity:      Sustainable yields of
                     11,200,000 metric tons
                     per year (Northeast
                     Atlantic)

22.  Impact and Effect:  LOW and PRODuct 

The damage to the environment and resources around the Shetland
Islands was much lower than expected.  The rough action of the
seas helped to break up the light crude fairly rapidly.  The
worst impact that the spill has resulted in is the damaged done
to the good name of the Shetlands.  Many people on the islands
are worried, and rightly so, about a drop in tourism.  The
islanders are being compensated financially, but the overall
effect is hard to measure in monetary terms, and in human terms.

23.  Urgency of Problem: LOW and 100s of years

24.  Substitutes: LIKE products

VI.  Other Factors

25.  Culture: YES

Western culture could be a factor in this case because off the
need for oil.  If oil was not used by a country such as Canada to
power its cars, heat its home, and as an energy source, this
accident never would have occurred.  The ship was taking oil to
Canada to be refined.  If alternative sources of energy could be
used (e.g. nuclear, solar, etc.) then perhaps accidents of this
nature can be avoided in the future.  As for culture in relation
to the product, fish are part of the diet of the people of the
Shetland Islands and the countries to which the United Kingdom
exports to.

26.  Human Rights: NO

27.  Trans-Bordary Issues: NO

28.  Relevant Literature

"Braer Crude Oil Tanker Splits as Weather Hinders   
Containment." Oil & Gas Journal, 18 January 1993.

"A Disaster That Wasn't."  New Scientist, January 1994.

"Hovercraft Used on Bird Rescue Operation," Press Association   
Newsfile, 8 January 1994.

"Hundreds of Dead Birds Killed by Oil Pollution," Glascow   
Herald, 24 January 1994, p. 7.

"Islands Council Calls for Public Inquiry Into the Braer    
Disaster," Scotsman, 22 January 1994, p. 4.

"Lucky Braer Escape Leaves No Room for Complacency,"  Lloyds
List, 4 January 1994.

"Measuring Damage," Lloyd's List, 17 January 1994.

"Shetland Councillors Consider Court Action," Scotsman,
21 January 1994, p. 1.

"Shetland Oil Spill Did Little Harm."  New Scientist,
26 June 1993.

"Sir Hector Comments on Braer Reports," UK Government Press   
Releases, 20 January 1994.

"The Tainted Isles Come Clean," Scotsman, 5 January 1994, p. 8.

"Tanker Spills Norwegian Crude Off Shetlands."  Oil & Gas   
Journal, 11 January 1993.

"The Wreck of the Braer."  Economist, 9 January 1993.
     



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1/11/97