Oil Spills Issue And Ways To Overcome It

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1.0  INTRODUCTION

1.1.1 This is a research report about the selected oil spills incident that happen in the Malacca Straits especially in Penang state and also a proposed solution for it in order to prevent or reduced future oil spills. It is also to estimate the natural resource losses incurred for the purposed of oil spill response and to avoid further damage. Even though the spills cases in the scope of this research is not consider as a major oil spills that took years for the spills to be diminished, the concept applied from this research however can be useful for the future purposed in case the major oil spills is really happens.
Oil spill issue has been affecting Penang from many years ago until now. The issue was caused by a few scenarios such as accidents and illegal oil discharge. However, the spill from the collisions of oil tankers are quite uncommon and involving only a small spill in this straits, compared to the largest spill of the world history that happen in other part of the world such as the vessel’s of Atlantic Empress (1979) and Exxon Valdez (1989) which happen in Trinidad and Tobago and Alaska respectively.
The current issues that happen in Penang from a few years ago until now such as in year 2016 and 2018 are mainly because of the illegal oil discharge and the accidents from the non-tanker vessel respectively, which have affected the coasts and the seawaters in the involved areas. For instance, in  July 2018, a vessel from Hong Kong, China which carried fishes at the Permatang Damar Laut seawater, near Bayan Lepas, has hit a ship wreckage, which caused the vessel to sink.  According to a report, it is believed that the non-functioning beacon light from a buoyant that used to marks the wreckage being the causes of the doomed vessel. However all the sailors including the captain were saved by the nearby fishermen.  On the other hand, the incident in May 2016 was caused by the illegal oil discharge which has polluted the seawater starting from the Swettenham Port until the Gurney Drive coasts. Both incidents happen in the early morning when it is still dark and has affected the local fishermen whose their income are depended on the fisheries activities in the areas, especially in the Permatang Damar Laut. The sunk vessel wreckage in the area which become an artificial reef for the fish and for the recreational fishing activities, has also been affected from the spills. This caused the fish to migrate elsewhere and reduced the stock of fish in the artificial reefs, which in turn create the lost of passive values. Furthermore, the Gurney Drive coast was also polluted with the oil and the recreational value which is also the passive value in the area had been affected. The recreational value is the walking path which is the public amenities, along the coast for recreational purpose.
1.2  Literature Reviews
Among the worst cases of oil spills that happen in the Malacca Straits was the spills that happen in Tanjung Kukup, Johor in 1993. The spills caused by a collision between an oil tanker and another vessel, resulted in a financial loss estimated around millions of dollar for the hotel business and also to the aquaculture industries in the area. The marine life, mangroves, rocky sea bank and coastal waters were covered with oil slicks. The nearby fishermen income revenue from fisheries also dropped because the oil spills has reduced stock of fish in the sea (Jaswar et al. 2010). Artificial reef is where the fish in the seas are harvested naturally. According to Santos (2008), passive use values for artificial reef  arise when people derive satisfaction from knowing the benefits of it such as increasing species diversity and conserving unique habitat for future generations.
 A few contributions factors that caused the oil spill happen at the Malaysian coasts and seawaters and the factors are mostly come from the human errors instead of the technical problems. Among the contribution factors that come from humans are inadequate knowledge of the vessel’s operations, lack of training, fatigue and the misunderstanding or miscommunication between the crews (Ishak, 2018).  Current internalizing the costs from the spills are heavily depends on the liability law, which is the owner of a vessel who caused the spills will be liable to pay for all the costs incurred especially the clean up cost. However, most of the modern ships or vessels nowadays are covered with insurance, which made them limited to the related liability and they put little precautious to avoid the oil spills. (Titienberg et al, 2009).  A 1992 International Convention on Civil Liability for Oil Pollution Damage (CLC) had also addressed that  strict liability will be imposed to vessel’s owner who caused the spills and limited liability for certain gross of tonnage spilled. CLC also clarify that the types of vessels are not limited to the oil tanker but also to the ordinary ships. Under this convention, the liability is considered deprive if the failure of navigational aids such as lighthouse, beacon lights from the buoyant etc occurs which causes vessels to sink and the accident is not stemmed from the reckless or negligent act from the sailors or the captain onboard (Yang, 2017).  However, for this exercise project purposed, it is considered that the vessel that sunk in Permatang Damar Laut is failed to detect the wreckage under the sea by using their own technologies such as the sonar detection, lights etc. This is important so that the feasible solution for this project can be executed.
According to Ramli (2017), the parties who are affected from the oil spill damages or losses can consider to take legal action to the other parties if they want. For instance, a group of fishermen who incurred losses of income because of the damages caused by the oil spills can sued the parties who caused the spills. However there are certain conditions to be considered under the Malaysian Common Laws such as :-
·        The fishermen who take the legal action must possess a legal license to conduct such commercial fisheries activities and to be eligible to make the legal action.
·        It is not wholly a claim for a public properties
·        Caused by factors such as pure economic loss, public nuisance, negligence and must proof the damage is caused by the pollution.
1.3 How economics can help solve the affected oil spills environment.
        UNLIMITED LIABILITY                       P MCOP
                                                                                    VMCOP’
 

                                                                                    Amount of precaution
                                                Q         Q*
The above sketch graph explained the effect of increasing precaution (when sailing the vessel) in a host country seawater by using the Marginal Cost of Precaution slopes. It is seen that the effect will surely reduce the cost when MCOP moving to MCOP’. This is because of the usage of i.e the new technologies to prevent oil spills from the vessel. However, this is not only the case. Supposed there is another curve (negative slope) which represents limited liability, and now the vessel is covered with insurance. This will reduce the Q* back to Q because the vessel owner knows that he will be not eligible to fully bear the cost if the spillage accident happens. This effect become the causal of many oil spills accident (especially in the developing countries), because most of the vessel owner do not really exercise care to avoid the spills. The above policy is under the liability law.
Regarding this, there is another method called Contingent Valuation Method (CVM), used to evaluate the value of use and non-use (passive) value of the environmental natural resource. This is important so that we can estimate how much losses and cost that has to be borne from the affected environment. In this case is the oil spill. The damages of non-use value and use value in the affected area of Permatang Damar Laut and Gurney Drive until Port Swettenham will be evaluated by using this method or technique and subsequently, the cost can be used for purposes such as oil spill response, future prevention of the same type of spills or possible provision of non-use value compensation under the pollution act. Oil spill response measurement usually is taken by the Jabatan Laut Malaysia with the help of Sahabat Alam Sekitar Malaysia (SAS) for restoration of the damages environment natural resources.
2.0  PROBLEM STATEMENT
 Since the oil has been found which is in 1800’s (19th century), there has been many cases of oil spill from the vessels were reported. This type of incident has negatively affects the ecological system as well as habitat and the population of animal on Earth.
According to Vladkova B. et al (2018), the oil spill from Exxon Valdez which recorded the 37,000 tonnes metric of spill in 1989 (250,000 tonnes metric by comparison from Atlantic Empress incident in 1979), has killed at least 25000 seabirds, 2800 otters, 12 river otters, 300 seals, 247 eagles, 22 orcas, unknown number of herring and salmon. The spill has also made the coast along Prince William Sound in Alaska contaminated up until 1992, with the remaining of 90 tonnes of oil spill, which represent not more than 1% of the total spills, still polluting the area. Now, after 30 years, there is still some of the polluted oil in the seawater which is not fully biodegraded but the effect is not that worst compared to the first time it spilled. Another incident that happen involving an oil rig named Deepwater Horizon in the Mexican Gulf, caused the among the largest oil spills in the history of petroleum industry which is 492,000 until the maximum of 627,000 tonnes metric. However, all the incurring costs from the incidents were liable to the owner of Deepwater Horizon namely Transocean, the tenants which is British Petroleum and others. The insurance company however covered the related costs of the losses that caused mainly by the British Petroleum, even though the accident seems stemming from the less exercise care of oil spills from the company.

3. THE ANALYSIS
This analysis will be divided into two parts, according to the affected areas and the uses analysis is the Willingness-To-Pay (WTP).
         i.            Permatang Damar Laut area :
There are affected natural resources and tangible goods or use value in this area which are the artificial reefs; which became the house for a shoal of fish and the affected fishermen respectively. The oil spills happened near the artificial reef which caused the spills to affected it. The affects from the spill can be summarised in the below diagram.

At point A, the maximum benefit from fishing activities is achieved. However, when moving along the ‘total amount of oil spills’ curve to point B, the benefits are zero. This can be caused by the migration or reduced fish from the artificial reef when the oil spills have increase to a significant level. To evaluate or preserve the benefits from the artificial reef such as recreational fishing, i.e from the boat fishermen and the commercial fisheries, the use value analysis must be used.
             Another use value is the value that nearby fishermen willing to pay, to avoid the oil spills from affecting or damaging the natural resources while the passive value is the knowledge of benefits from preserving the artificial reef both for the sustainable species diversity and future generations; and this also applied to the amount of fish in the reefs. All the households in the area will be surveyed to get the WTP demand curve for both values. The total use or economic value can be acquired by adding all the values.
            To design the survey for use and passive value, the dichotomous choice and open-ended  of question will be used. The fishermen (small pretest group) in the area will be asked the value they willing to pay, i.e to preserve the artificial reef by using open-ended question for the first tier. This is to get the relevant range of values (minimum and maximum). Second tier, household (large group) in the area will be asked about their WTP by using dichotomous choice which are the upper and lower bound choice. The idea is to get the yes-yes, yes-no, no-yes or no-no respond value and it will be recorded from this survey. It is expected the value of WTP yes-yes (range from maximum to minimum) will decrease while the no-no is vice-versa (Carson, 2003) . From there, we can derive the WTP demand curve function and the total of economic value, TEV (after added the both values). The explanatory variables such as income, age, sex, education, concern for the environment and the degree of active use are also included into the demand curve function.

       ii.            Gurney Drive until Port Swettenham area:
This area is affected with oil spills which is a little bit worse compared to the Permatang Damar Laut area. This is because the types of spilled oils are not the same in which the sunken vessel in Permatang Damar Laut is the diesel (refined oil) while the Gurney-Swettenham areas is unrefined oil (crude) plus some engine oils. The oil slicks can be spotted at the rocky sea bank until the seawater. The oil spill had defected the scenery at these areas once. For this reason, the appropriate analysis is by using the Travel Cost Method. The reason is because many of the local or outside the Penang people come to these areas to enjoy the scenery and also doing recreational activities such as walking or exercising along the seaside. Travel cost method can evaluate the direct use value of such as the recreational value of these areas. The proxy of Y-axis represent the travel cost (RM) while the X-axis represent the number of trips i.e across the years. The value is acquired by averaging all the individual’s consumer surplus (travel cost) and multiplying it with the number of the recreationist across the year.
            There are also option value under passive use value for Penang outsiders which is the seaside views along these areas. The method to analyze this value is similar to what has discussed before, but the question for the survey instrument will be “how much would you willing to pay to make sure the sustainable of the current beautiful scenery when you visited this place in the future”?
           

4. CONCLUSION
            Willingness-to-pay is used for the survey instead of willingness-to-accept (WTA) because of the psychological endowment effect; in which people tend to put high value for goods or services they owned rather what they have to pay. This will create high discrepancy between both WTP and WTA and subsequently made the survey irrelevant.
            For the time being, the passive value of WTP under local common law cannot be used to estimate the compensation value for the purposed of suing the third party who caused the pollution. Considering the case of Exxon Valdez, initially under the Oil Pollution Act (1990), the affected passive value from the oil spills cannot be compensated because it has no ‘behavioural’ trace. However, the acquired value from WTP can be used as in terms of tax increase or goods and services price appraisal, as a payment vehicle, instead of direct monetary payment. This can contribute to the quick oil spill response from the authorities to restore the damaged natural resources of the environment where the cost and benefit from WTP can also increase the capacity and the efficiency of the response so that the serious impact of the spills can be dramatically reduced.  This is important because the effective and fast oil spills clean up could reduce the threat to the environment and marine’s life such as the fish in the artificial reefs.
            The oil spills in this straits can be prevent by using the latest technology for the vessels. The marginal analysis such as the analysis of marginal cost of precaution must be conducted. By increasing the technology of the vessels such as the double- hulls technology, can prevent and/or might avoid the worse of the spills. Furthermore, the escort ship also might be one of the steps of the marginal precaution analysis because this ship can guide the vessel through the less-risky route and also provided with oil clean up technologies in it. Finally, the provision of the passive value to compensate into any water pollution act or policies are a wise step to overcome the seriousness of oil spills in this straits considering such an act can bring no incentives to the vessel’s owner to cause the oil spills pollution.

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