Originally Released November 22, 2010

Updated January 11, 2011

1

National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling

RESPONSE/CLEAN-UP TECHNOLOGY RESEARCH & DEVELOPMENT AND THE

BP DEEPWATER HORIZON OIL SPILL

Staff Working Paper No. 7

Staff working papers are written by the staff of the National Commission on the BP Deepwater 

Horizon Oil Spill and Offshore Drilling for the use of members of the Commission. They do not 

necessarily reflect the views of the Commission or any of its members. In addition, they may be 

based in part on confidential interviews with government and non-government personnel. 

Of the many themes to arise in discussion of the Deepwater Horizon oil spill, one of the 

most pervasive has been that the spill response floundered because advances in clean-up 

technology had not kept pace with advances in exploration technology.1 As this narrative goes, 

over the last two decades, industry pushed the frontier of deepwater drilling so far that 

commentators have “compared the drive into ever-deeper waters to deep space exploration.”2 

Clean-up technology, on the other hand, “has progressed so little that the biggest advancement in 

the Gulf of Mexico disaster — at least in the public’s mind — is an oil-water separator based on 

a 17-year-old patent and promoted by the movie star Kevin Costner.”3 Although, by many 

accounts, technology “advanced a decade in the four months” of the response to the spill, 4

existing response equipment was not up to the challenge of such a large spill. “I don’t think any 

of us looks at this and says this is an acceptable response,” Shell Oil President Marvin Odum 

said during the summer of 2010.5

Spill clean-up technology has made incremental improvements since 1990. For example, 

the University of California Santa Barbara has developed a skimmer with novel surface 

geometry and drum rotation that increases recovery for spills, particularly on broken ice.

6

 Some 

other advances in skimming technology — such as high volume skimmers, portable skimmers, 

and shallow draft skimmers — were put to use during the spill response.7 Today’s boom can 

operate effectively in faster currents, 8 and dispersants are less toxic than they once were.9

 1 Professor Tyler Priest of the University of Houston (a consultant to the Commission) has argued that this “theme” 

is not unique to offshore drilling or even the oil business in general but is “common to all technologically innovative 

societies.” Tyler Priest, The Ties That Bind MMS and Big Oil, Politico (June 9, 2010). 

 

Information technology and how responders collect and use data — e.g., remote sensing and 

2 Jad Mouawad & Barry Meier, Risk-Taking Rises to New Levels as Oil Rigs in Gulf Drill Deeper, N.Y. Times (Aug. 

30, 2010). 3 Henry Fountain, Advances in Oil Spill Cleanup Lag Since Valdez, N.Y. Times (June 24, 2010). 4 Interview by Commission Staff with Oil Company Executive. 5 Steven Mufson, Concerns About the Big Spill Might Already be Drying Up, Wash. Post (Sept. 30, 2010). 6 Victoria Broje & Arturo A. Keller, Improved Mechanical Oil Spill Recovery Using an Optimized Geometry for the 

Skimmer Surface, 40 Envtl. Sci. & Tech. 7914, 7914 (Oct. 26, 2006) (“The study showed that using the new

surface pattern in the recovery unit can increase the skimmer oil recovery efficiency up to three times.”). 7 See E-mail from Dave Salt, Oil Spill Response Limited, to Commission Staff (Oct. 21, 2010) (on file with 

Commission staff). 

8 API, Recommendations of the Joint Industry Oil Spill Preparedness & Response Task Force V-9 (Sept. 3, 2010) 

[hereinafter API Report]. 9 R.R. Lessard & G. Demarco, The Significance of Oil Spill Dispersants, 6 Spill Sci. & Tech. Bull. 59, 62-63 (2000).
Originally Released November 22, 2010

Updated January 11, 2011

2

tracking techniques — have also improved.10 Progress has, however, been modest. Neither 

boom design and construction, 11 nor the “principles behind skimming systems,” 12 nor the “basics 

of mechanical recovery systems,” have significantly changed.13

This staff working paper discusses why a chasm between exploration technology and 

response technology has developed. Specifically, in the three sections below, this paper attempts 

to answer three basic questions: 

(1) Does the private sector invest less than the socially optimal amount in response/cleanup technology? 

(2) Do federal agencies lack adequate long-term funding to maintain response/clean-up 

preparedness?

(3) Can the federal government and industry create a set of incentives for private 

companies and government agencies that would optimize levels of investment in 

response/clean-up technology?

In addressing these questions, we have focused our analysis on response or clean-up technology 

— not to be confused with containment or well-control technology, which is the subject of 

separate work for the Commission.

14 We have also incorporated ideas discussed more fully in 

other work by the Commission and its staff. The response research and development (“R&D”) 

funding gap is a multi-disciplinary problem: Its causes are disparate, and possible solutions are 

rooted in a number of different legal and policy contexts (for example, appropriations, insurance,

and tax incentives).

What follows is the Commission staff’s effort to summarize the state of private sector and 

federal government response R&D.

15 We believe the facts illustrate that neither industry nor 

government has dedicated appropriate resources to clean-up technology since the Exxon Valdez

spill, and that the Deepwater Horizon spill response suffered as a result. With the proper 

combination of dedicated funding and creative incentives, however, Commission staff believes 

that the existing technology gap could begin to close. 

 10 See generally API Report, Chapter II. 11 See id. at V-3; see also Interview by Commission Staff with Louisiana Government Official. 12 See API Report at V-5; see also Louisiana Government Official Interview. 13 See API Report at v. 14 On Wednesday, July 21, 2010, Exxon Mobil, Chevron, Shell, and ConocoPhillips announced the creation of the 

Marine Well Containment Company, a non-profit joint venture “to design, build and operate a rapid-response 

system to capture and contain” future oil spills in the Gulf of Mexico. Angel Gonzalez, Oil Firms Plan RapidResponse Force, Wall St. J. (July 22, 2010). 15 Certain states, including Alaska, California, Louisiana, and Texas, have funded oil spill R&D projects. Texas, in 

particular, has allocated approximately $1.25 million per year to oil spill R&D since 1992. See Telephone Interview 

by Commission Staff with Dr. Buzz Martin, Texas General Land Office (Dec. 30, 2010). 
Originally Released November 22, 2010

Updated January 11, 2011

3

I. Private Sector Response R&D: Little to No Funding

According to news reports as well as experts interviewed by staff, the oil industry 

committed significant funds to clean-up technology R&D in the years immediately following the 

Exxon Valdez spill, but this commitment quickly waned.16 Industry funding for response R&D 

fell off after the mid-1990s. Today, oil companies invest “little to no” money in oil spill 

response technology. 17

The limited industry data available to Commission staff supports this narrative. As 

discussed in Part A below, information provided to the staff by five major oil companies 

suggests that — at least today — industry spends little to no money on in-house response R&D 

efforts. As discussed in Part B, industry does support independent Oil Spill Removal 

Organizations (OSROs), but these underfunded organizations similarly allocate little to no 

resources toward response R&D.

A. In-House R&D Funding

Because data on response R&D spending by the oil industry is not publicly available, the 

Commission staff requested historical (i.e., since 1990) and current response R&D figures from 

ExxonMobil, Shell, ConocoPhillips, Chevron, and BP.

18 What follows is a summary of the 

responses we received:

• ExxonMobil: “ExxonMobil R&D investments impacting oil spill response containment 

and clean-up technology were about $60 million over the past 20 years (1990-2009).” 

ExxonMobil went on to cite its participation in “cooperative” research efforts “by a 

variety of government agencies, academic institutions, and industrial [sic] participants 

since 1989 to improve upon existing technologies and response options.”19 

• Shell: “Our estimate, based on input from Shell experts, is that Shell spends about an 

average of $5 million annually on spill research.” Shell went on to cite its participation 

in, and funding for, OSROs like the Marine Spill Response Corporation (MSRC) and 

Alaska Clean Seas, trade associations like the American Petroleum Institute (API), and 

government/university partnerships like the Coastal Response Research Center. 20

 16 See, e.g., Fountain, Advances in Oil Spill Cleanup Lag Since Valdez (“And research money from oil companies 

has declined in the same period.”); Telephone Interview by Commission Staff with Oil Industry Consultant (“Money 

dried up after Exxon Valdez.”).

 Shell’s 

17 Julie Schmit, Despite Previous Spill, Oil Cleanup Research Falls Short, USA Today (May 24, 2010) (“And oil 

companies have invested ‘little to no’ money on oil spill response technologies, concentrating instead on oil 

exploration and spill prevention, says Robert Peterson, a consultant to the oil and gas industry at Charles River

Associates.”). Robert Peterson (a consultant to BP) reiterated this same “little to no funding” language in an August 

30, 2010 telephone interview with Commission staff.

18 API did not respond to requests for cumulative industry response R&D funding figures. As for API’s own 

funding for response R&D, reports suggest that “API doesn’t have a budget for oil spill response research, but it puts 

on a spill response conference.” Schmit, Despite Previous Spill, Oil Cleanup Research Falls Short. 19 E-mail from Theresa M. Fariello, ExxonMobil, to Commission Staff (Sept. 21, 2010) (on file with Commission 

staff).

20 E-mail from Sara Glenn, Shell, to Commission Staff (Sept. 10, 2010) (on file with Commission staff).
Originally Released November 22, 2010

Updated January 11, 2011

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$5 million annual estimate includes its funding for OSROs, trade associations, and other 

organizations that conduct R&D.21 

• ConocoPhillips: “Our expenditures on spill response technologies are not reported 

separately in our financial reports. However, in the Gulf of Mexico, we are a member 

company of Clean Gulf Associates and Marine Response Spill Corporation. We are also a 

member of the Ohmsett facility in New Jersey (National Oil Spill Response Research and 

Renewable Energy Test Facility), which provides full-scale oil spill response equipment 

testing, research and training. Our Alaska Business Unit has abundant spill response 

equipment through Alaska Clean Seas, and we recently participated in oil-under-ice 

method testing through a joint industry project at a cost of $1.2 million. Through our 

participation in industry groups such as API Emergency Preparedness & Response 

Committee, IPIEA Industry Technical Advisory Committee and Arctic Task Force, as 

well as our cooperatives, we continuously evaluate new technologies and equipment that 

maximize recovery and minimize waste creation during spill response.”22

• Chevron: “In general, Chevron does not conduct independent research on spill response 

technologies specifically, but we do have a financial and manpower involvement in oil 

spill cooperatives or for profit response companies.”23

• BP: “[T]he company does not separately account for various types of R&D spending. 

BP’s worldwide R&D expenditures are spread across various business units and are 

embedded in operational budgets. Further, BP’s amounts spent on R&D activities take 

many forms, including alliances with universities and participation in R&D consortia 

with industry partners.”24 

Based on these responses, it is difficult to pinpoint what resources, if any, these five

major oil companies have allocated to in-house response R&D over the last two decades. 

ExxonMobil claims to have spent an average of $3 million annually on “oil spill response 

containment and clean-up technology,” but this estimate lumps in containment technology 

spending with response R&D spending, and may include ExxonMobil’s expenditures on OSROs 

and other outside entities, too. Shell estimated its annual “oil spill response” expenditures to be 

$5 million, but this line item includes Shell’s expenditures on OSROs, trade associations, and 

other organizations. Responses from ConocoPhillips and Chevron confirm that those two 

companies spent no money on developing spill clean-up technology in-house, and BP’s response 

does not indicate whether it spends any money on clean-up technology. Based on the available 

 21 E-mail from Sara Glenn, Shell, to Commission Staff (Oct. 20, 2010) (on file with Commission staff). 22 E-mail from Jim Ford, ConocoPhillips, to Commission Staff (Sept. 14, 2010) (on file with Commission staff). 23 E-mail from Lisa Barry, Chevron, to Commission Staff (Sept. 3, 2010) (on file with Commission staff). 24 E-mail from Daniel Squire, WilmerHale, to Commission Staff (Nov. 18, 2010) (on file with Commission staff). 

See John Flesher & Phuong Lee, Little Spent on Spill Cleanup Technology, Associated Press (June 26, 2010) 

(“[S]pokesman Robert Wine said BP does not research oil spill cleanup technology. Instead, he said BP supports oil 

spill response organizations, such as the nonprofit Marine Spill Response Corp.”). 
Originally Released November 22, 2010

Updated January 11, 2011

5

information, we believe it is fair to assume that industry spending on in-house response R&D has 

been, and is currently, minimal at best.

25 

B. Oil Spill Removal Organizations: R&D Not a Priority

Although ExxonMobil, Shell, ConocoPhillips, Chevron, and BP do not seem to have 

allocated significant (if any) resources to in-house response R&D, these companies have all cited 

their participation in, or funding for, OSROs and non-profit organizations as evidence of their 

commitment to response R&D.26 We briefly describe below the three most prominent non-profit 

OSROs, including MSRC — the self-proclaimed “nation’s largest oil spill recovery 

organization”27 — as well as the largest for-profit OSRO. Our analysis shows that the OSROs 

all operate on a limited scale, and with a small amount of funding. Response R&D is not a 

priority for any of the OSROs. 

i. Marine Spill Response Corporation

ExxonMobil, Shell, ConocoPhillips, Chevron, BP, and over 100 other oil companies are 

members of MSRC, a non-profit created by industry after the Exxon Valdez disaster to respond to 

oil spills, including catastrophic ones. MSRC is a subsidiary of the Marine Preservation 

Association (MPA).

28 By joining MPA, a company gains the right to enter into a service 

agreement with MSRC. A member company individually pays for MSRC’s cleanup costs in the 

event of a spill for which the company is responsible. Member companies pay dues to MPA

generally in proportion to the amount of oil received via marine transportation and produced in 

U.S. waters. MPA, in turn, funds MSRC, which today has about 400 employees and owns 

fifteen specialty ships, each 210 feet long with temporary storage for 4,000 barrels of recovered 

oil.

29

 25 Although it is difficult to find an appropriate metric to put industry in-house response R&D funding levels in the 

proper context, note that ConocoPhillips’s total R&D expense in 2009 alone was $190 million, Chevron spent $603 

million in 2009 on R&D, and ExxonMobil spent $1.05 billion. Chevron Corporation, Annual Report (Form 10-K), 

at 29 (Feb. 19, 2010); ConocoPhillips, Annual Report (Form 10-K), at 130 (Jan. 31, 2010); ExxonMobil 

Corporation, Annual Report (Form 10-K), at 41 (June 30, 2009). 26 Section 4202 of the Oil Pollution Act of 1990 requires the preparation and submission of response plans by the 

owners or operators of certain oil-handling facilities and for all vessels defined as “tank vessels” under 46 U.S.C. 

§ 2101. An owner or operator of such a facility or tank vessel is required to submit a response plan that, among 

other things, identifies and ensures by contract or other means the availability of private personnel and equipment 

necessary to remove, to the maximum extent practicable, a worst case discharge, and to mitigate or prevent a 

substantial threat of such a discharge. The Coast Guard created the voluntary OSRO classification program so that 

facility and tank vessel response plan holders could list OSROs in response plans in lieu of providing extensive 

detailed lists of response resources if “the organization has been classified by the Coast Guard and their capacity has 

been determined to equal or exceed the response capability needed by” the plan-holder. 33 C.F.R.

§ 154.1035(e)(3)(iii). 27 Joe Stephens & Mary Pat Flaherty, Oil Industry Cleanup Organization Swamped by BP Spill, Wash. Post (June 

29, 2010). 28 “The structure was designed to shield oil companies from liability, in case MSRC was later found responsible for 

damages related to a skimming operation, according to official accounts at both organizations.” Id. 29 Id. In comments to the Commission staff following the original release of this paper, MPA stated that “MSRC 

also owns nineteen oil spill response barges with storage capacities between 12,000 and 68,000 barrels, sixty-eight 

shallow water barges, 600,000 feet of boom, over 240 skimming systems, six smaller self-propelled skimming 

vessels, seven mobile communication suites outfitted with the latest technology, has access to four contractually 
Originally Released November 22, 2010

Updated January 11, 2011

6

The primary source of funding for MSRC has always been direct industry 

contributions.30 ConocoPhillips’s and Chevron’s individual contributions to MSRC, for 

example, are approximately $13 million annually. 31 Each year, CEO Steve Benz requests a 

budget for MSRC from the board of MPA, which is largely composed of representatives from 

MPA’s member companies. According to Mr. Benz, roughly 80% of MSRC’s annual budget is 

derived from the five largest oil companies, 18% comes from medium-sized or independent 

companies, and vessel and pipeline owners and operators account for the final 2%. 32 

Upon its formation in 1990, MSRC obtained $30 to $35 million for a five-year R&D 

program, but “[a]t the end of its five-year program, MSRC eliminated its Research & 

Development program as its objectives had been achieved.”33 Today, as Mr. Benz told the 

Commission staff, MSRC has “no budget for research.” 34 

Publicly available financial records show that, from 2000 to 2008 (the last date for which 

information is available), MSRC’s “total revenue” (i.e., direct member contributions plus 

revenue generated from spill response activities) held constant at roughly $80 to $90 million per 

year.

35

 

dedicated aircraft for aerial dispersant application — two C-130s and two King Air BE-90s — and the largest 

stockpile of dispersant inventory in North America.” 30 See Marine Spill Response Corporation, Internal Revenue Service: Forms 990, 2000-08 [hereinafter MSRC Forms 

990]. 31 E-mail from Jim Ford, ConocoPhillips, to Commission Staff (Oct. 8, 2010) (on file with Commission staff); 

E-mail from Rob Walker, Chevron, to Commission Staff (Sept. 7, 2010) (on file with Commission staff). 32 Interview by Commission Staff with Steve Benz and Judith Roos, Marine Spill Response Corporation (Sept. 7, 

2010) [hereinafter MSRC Interview]. 

33 API Report at VIII-3. 34 MSRC Interview; Schmit, Despite Previous Spill, Oil Cleanup Research Falls Short (quoting MSRC Marketing, 

Customer Services & Corporate Relations Manager Judith Roos). 35 MSRC Forms 990.

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

$90,000,000

$100,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008

MSRC Revenue & Industry Contribution, 2000-08

Total Revenue

Industry Contribution

Source: MSRC IRS Filings
Originally Released November 22, 2010

Updated January 11, 2011

7

During this same period, the “industry contributions” component of MSRC’s total 

revenue averaged $70 to $75 million annually, or roughly 80% of MSRC’s total revenue (except 

in 2005 and 2006).36 According to Mr. Benz — who has been CEO since 1995 — MSRC’s 

member companies (which comprise the MPA board) have never attempted to cut its funding. 

Mr. Benz told Commission staff, however, that he is always careful to propose a budget that will 

be “reasonable” to the industry37

Publicly available financial information confirms that the level of funding from industry 

is insufficient for MSRC to purchase cutting-edge equipment or grow its asset base. MSRC 

began operations in 1990 with capital equipment valued at approximately $325 million;

— that is, not to ask for too much. 

38 by 

2008 its asset value had declined in a near straight line to $113 million.39

According to Mr. Benz, MSRC performed well with the equipment it had during the spill 

response, collecting “well over half” of the oily water recovered offshore by all responders.

 The company has not 

made substantial investments in new spill response equipment. With aging ships, boom, and 

skimmers, MSRC would seem to require significantly increasing contributions from its 

membership base both to maintain its existing level of readiness and to innovate or grow. 

40 By 

most accounts, however, MSRC was ill-prepared to handle the scale of the Deepwater Horizon 

disaster. Much of the MSRC’s equipment was not “up to the current challenge.”41

In short, MSRC is underfunded. Its equipment is static; it has limited resources to 

purchase new equipment, and no resources to develop technologies. MSRC contributed to the 

spill response efforts, but it has not grown into the evergreen response organization it was 

designed to be. Industry has provided only the support necessary for MSRC to maintain its 

status quo, with no funds for research into or development of improved spill response 

technology.

 MSRC may 

have adequate resources to handle smaller spills, but it did not have the assets needed to respond 

to a Spill of National Significance. 

 36 Id. In comments to the Commission staff following the original release of this paper, MPA stated: “MPA as the 

funding entity collects member dues in excess of amounts provided to MSRC as a mechanism for setting aside 

reserve funds for the express purpose of reinvesting in new response equipment . . . . Thus, member contributions 

have in fact increased over time.” 

37 MSRC Interview. 38 See API Report at VIII-3. 

39 MSRC Forms 990. MSRC has undertaken one capital reinvestment program, and is in the midst of a second. In 

the early 2000s, the company spent $25 million on equipment updates. In 2009, it began a “comprehensive plan for 

capital investment” to spend another $25 million on updates over five years. See MSRC Interview. 40 Stephens, Oil Industry Cleanup Organization Swamped by BP Spill. Note, however, that Plaquemines Parish, 

Louisiana President Billy Nungesser criticized MSRC’s performance in the spill response in his testimony before the 

Commission on September 27, 2010: He complained that MSRC was “not prepared, had no boom, no equipment 

for this response. The stuff they brought to my parish sat on trailers for months.” 41 Stephens, Oil Industry Cleanup Organization Swamped by BP Spill. 
Originally Released November 22, 2010

Updated January 11, 2011

8

ii. Clean Gulf Associates

The non-profit Clean Gulf Associates, founded in 1972, has 135 members — all 

operators in the Gulf of Mexico. 42 It provides boom, skimmers, and dispersant-related 

equipment in the event of a spill. Its scale is modest: Clean Gulf owns one high-volume opensea skimmer, four fast response vessels, and nine portable skimming systems that were deployed 

on vessels of opportunity during the spill response. 43 A Clean Gulf affiliate also owns and 

operates a $6.5 million aircraft, used to spray dispersants during the response. 44 Initial

membership fees can range from $5,000 to $50,000.

45 Basic annual dues start at only $12,800 

and rise as high as $1.6 million (for BP) depending upon a member’s production levels.46

Since 1997, Clean Gulf has partnered with MSRC. Under the terms of the agreement 

between the two OSROs, Clean Gulf owns equipment and MSRC stores, maintains, and operates 

this equipment in the event of a spill in the Gulf of Mexico.

47

Clean Gulf’s publicly available financials list assets of approximately $8 million (not 

including its recently purchased aircraft) as of the end of 2007.48 Clean Gulf’s director estimates 

that its assets have a market value of approximately $18 million.49 Its 2010 budget was $5.2 

million, and its 2011 budget has increased to $7.2 million, but these budgets only include 

$100,000 for “new technology” and no allotment for R&D. 50

iii. Alaska Clean Seas

 

Alaska Clean Seas, which operates out of Prudhoe Bay, Alaska, is a non-profit formed in 

1979 for the purpose of maintaining spill response equipment for ten companies operating in

Alaska, which include Alyeska Pipeline Service Company, Anadarko, BP, Brooks Range 

Petroleum Corporation, ConocoPhillips, Eni Petroleum, ExxonMobil, FEX LP, Pioneer Natural 

Resources, and Shell.51

 42 Telephone Interview by Commission Staff with Frank Paskewich, Clean Gulf Associates (Oct. 15, 2010). Note 

that BP, Shell, and Marathon Oil did not become members of Clean Gulf Associates until September 2010. Id. 

 Its scale is significantly more modest than MSRC: It has 78 employees 

(including contractors), its initiation fee for oil producers is $500,000, and its annual dues are 

43 Id. 44 Id.; see also Jen DeGregorio, Clean Gulf Acquires New $6.5 Million Aircraft, Times-Picayune (July 20, 2009). 45 See Clean Gulf Associates, http://www.cleangulfassoc.com; Clean Gulf Associates 2010 Annual Report, available 

at http://www.cleangulfassoc.com/PDFs/2010_Chairmans_Report.pdf. 46 Paskewich Interview. 47 See, e.g., Clean Gulf Associates 2010 Annual Report. 48 Clean Gulf Associates, Internal Revenue Service: Form 990 (2007), available at

http://nccsdataweb.urban.org/orgs/profile/721058176?popup=1#forms.

49 Paskewich Interview. 50 Id. 51 Alaska Clean Seas 2010 Yearbook at 8, available at

http://www.alaskacleanseas.org/adobefiles/2010%20Yearbook_web.pdf. Chevron resigned from Alaska Clean Seas 

in 2009. See id. at 4.
Originally Released November 22, 2010

Updated January 11, 2011

9

$50,000.52 According to publicly available information, Alaska Clean Seas has an asset base of 

$7.3 million dollars.53

Alaska Clean Seas’ promotional materials discuss its R&D efforts at length. According 

to its 2010 yearbook: 

Alaska Clean Seas has maintained an active oil spill Research and Development (R&D)

program since the early 1980’s and acts as a facilitator for much of the research and 

development related to spill response in arctic conditions. The R&D program focuses on 

specific areas such as oil spill recovery techniques in, on, and under ice and during 

various broken ice conditions. Other areas of research include viscous oil pumping, 

methods to detect and track oil under ice, and alternative response options.54

The OSRO’s 2010 yearbook also makes clear that only “an average of $200,000 annually was 

spent on advancing arctic spill response through R&D” during the past decade.55 Unlike MSRC 

and Clean Gulf Associates, Alaska Clean Seas does have a small amount of dedicated funding 

for response R&D. 

iv. National Response Corporation 

In contrast to MSRC, Clean Gulf Associates, and Alaska Clean Seas, National Response 

Corporation is a for-profit OSRO. The company, founded in 1992, is a subsidiary of the 

publicly-traded Seacor International, a diversified offshore oil and gas, industrial aviation, and 

marine transportation company. 

Specific information on National Response Corporation’s revenues, assets, and client 

companies is not publicly available. News reports suggest that the National Response 

Corporation dedicated “eight ships it owns . . . and more than 100 other vessels” to the 

Deepwater Horizon spill response.56 Steve Candito, the President of the National Response 

Corporation, told Commission staff that the “spill response would have been a hell of a lot worse 

without NRC.”57 

Like MSRC, National Response Corporation has no R&D budget. According to Mr. 

Candito, the company is “a service provider, not a manufacturer.”58 National Response 

Corporation is “not in the business of building skimmers.”59 

 52 Id. at 8. 53 Alaska Clean Seas, Internal Revenue Service: Form 990 (2008), available at

http://nccsdataweb.urban.org/PubApps/showVals.php?close=1&ft=bmf&ein=920163046. 54 See Alaska Clean Seas 2010 Yearbook at 25. 55 Id. 56 Stephens, Oil Industry Cleanup Organization Swamped by BP Spill. 57 Telephone Interview by Commission Staff with Steve Candito, President of NRC, and Paul Robinson, General 

Counsel, Seacor International (Nov. 11, 2010). 58 Id. 59 Id.
Originally Released November 22, 2010

Updated January 11, 2011

10

* * *

In short, although the Commission staff’s data set on response R&D spending by major 

oil companies and OSROs is incomplete, the evidence available suggests that the oil and gas 

industry allocates little to no money to response R&D. Of the five major oil companies 

surveyed, one indicated it does not separately account for response R&D, two answered that they

allocate no funds directly toward in-house R&D efforts, and two provided answers suggesting 

their in-house response R&D funding is — at best — minimal. The companies cited 

participation in OSROs as evidence of their commitment to response R&D, but the four most 

prominent OSROs also allocate few dollars to developing clean-up technology. Thus, the 

Commission staff can comfortably conclude that public reports appear to be true: The oil 

industry has not invested in response R&D. 

II. Federal Agency Response R&D Funding: Authorized But Not Appropriated

The Oil Pollution Act of 1990 establishes an Interagency Coordinating Committee on Oil 

Pollution Research to “coordinate a comprehensive program of oil pollution research, technology

development, and demonstration among the Federal agencies, in cooperation and coordination 

with industry, universities, research institutions, State governments, and other nations, as

appropriate, and . . . foster cost-effective research mechanisms, including the joint funding of 

research.” 60 The Committee is chaired by the Coast Guard and includes representatives from 

fourteen federal agencies. 61 The Committee produced the first Oil Pollution Research and 

Technology Plan in 1992, and a second plan in 1997.62 There has been no update of the research 

plan since 1997.63

The Oil Pollution Act authorizes up to $22 million in annual funding for the Interagency 

Committee’s “comprehensive program of oil pollution research” and an additional $6 million 

annually for a Regional Research Program. The Act also specifies that this funding is “subject to 

appropriations.”64

 60 Oil Pollution Act of 1990 § 7001(a)(2), 33 U.S.C. § 2761(a)(2).

 As the following chart illustrates, not even half of the authorized $28 million 

has been appropriated in any single year since the passage of the Oil Pollution Act.

61 Id. 62 The Interagency Committee’s 1997 plan reported that ‘‘most of the information and technology gaps of 1990 

remain,’’ due to a failure to appropriate sufficient funds for oil pollution technology programs. Interagency 

Coordinating Committee on Oil Pollution Research, Oil Pollution Research and Technology Plan (1997). 63 On September 16, 2010, a public meeting was held in Washington, D.C. “to hear comments on the priorities of oil 

pollution research, including projects related to the Deepwater Horizon incident and the Arctic environment . . . . 

Public comment will then be used to augment the revision of the 1997 Oil Pollution Research and Technology 

Plan.” 75 Fed. Reg. 51473; see also Transcript, Interagency Coordinating Committee On Oil Pollution Research 

Meeting (Sept. 16, 2010).

64 Oil Pollution Act of 1990 § 7001(f), 33 U.S.C. § 2761(f).
Originally Released November 22, 2010

Updated January 11, 2011

11

Congress enacted the Oil Pollution Act in August of 1990, and in October of the same 

year, the Omnibus Budget Reconciliation Act of 1990.

65 Although Congress always intended 

the Oil Pollution Act’s oil spill research funding provision to be subject to the appropriations 

process, 66 it also intended that research appropriation to come out of the Oil Spill Liability Trust 

Fund,67 not out of the general treasury — so that oil spill research funding would be essentially 

“assured money.”68 The Budget Reconciliation Act, however, applied budget caps to all

agencies and all agency funding.69 Oil spill research was then forced to compete with other 

priorities within each agency for budget dollars, even though the research funds were from the 

Oil Spill Liability Trust Fund, and not the general treasury.70 

In part because the Budget Reconciliation Act forced a change in how oil spill research 

would be funded, contrary to the original intent of the Oil Pollution Act, Congress has never 

appropriated anywhere near the authorized amount for spill research funding. Total oil spill 

research appropriations for the Coast Guard, the Minerals Management Services (MMS, now 

BOEMRE), the National Oceanic and Atmospheric Administration (NOAA), and the 

Environmental Protection Administration (EPA) — the four agencies that have received the vast 

majority of Oil Pollution Act-authorized R&D funding — have averaged only roughly $10 

million per year since 1992, and have never exceeded $14 million per year. 71 

The oil spill research efforts of Coast Guard, MMS/BOEMRE, NOAA, and EPA are 

briefly outlined below. 

 65 Telephone Interview by Commission Staff with Dan Sheehan, Independent Consultant (Oct. 14, 2010). 66See H.R. Conf. Rep. 101-653, at 12-14 (1990), reprinted in 1990 U.S.C.C.A.N. 779, 790-92; E-mail from William 

Holt, U.S. Coast Guard (ret.), to Commission Staff (Oct. 20, 2010) (on file with Commission staff). 67See H.R. Conf. Rep. 101-653. 68 Telephone Interview by Commission Staff with Dan Sheehan, Independent Consultant (Oct. 22, 2010). 69 Id. 70 Id. 71 See infra Appendix A.

$0

$4,000,000

$8,000,000

$12,000,000

$16,000,000

$20,000,000

$24,000,000

$28,000,000

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

Oil Spill Research Funding Since OPA 90

USCG

MMS

NOAA

EPA

Total
Originally Released November 22, 2010

Updated January 11, 2011

12

A. Coast Guard Oil Spill Research

The Coast Guard conducts oil spill research through its Research and Development 

Center in Groton, Connecticut. Coast Guard’s budget for oil spill research was $5.6 million in 

1993, held constant at $3.5 million from 1998 through 2004, but fell to $500,000 in 2007 and has 

stayed at $500,000 for 2008, 2009, and 2010.72

B. MMS/BOEMRE Oil Spill Research

 The limited Coast Guard R&D budget has been 

allocated to four main areas: spill response planning and management, spill detection and 

surveillance, vessel salvage and on-board containment, and spilled oil clean-up and 

countermeasures. 

The MMS budget for oil spill research has held steady at $6.3 million for the last four 

years.73 MMS’s Oil Spill Response Research Program focuses on improving technologies used 

for detection, containment, and clean-up of oil spills that may occur on the Outer Continental 

Shelf. More than 40% of MMS’s R&D projects “are Joint Industry Projects, where MMS

partners with other stakeholders to maximize research dollars.” 74

MMS also operates OHMSETT, the National Oil Spill Response Test Tank Facility in 

Leonardo, New Jersey. Under the Oil Pollution Act, the agencies “represented on the 

Interagency Committee shall ensure the long-term use and operation of the Oil and Hazardous 

Materials Simulated Environmental Test Tank (OHMSETT) Research Center in New Jersey for 

oil pollution technology testing and evaluations.” 75 The Committee delegated this responsibility

to MMS. 76 MMS has described the OHMSETT facility as follows:

Ohmsett is the only facility in the world where full-sized oil spill response equipment can 

be tested and training of first responders can be conducted with a variety of oils in a 

simulated marine environment under controlled conditions. The primary feature of 

Ohmsett is a large outdoor, above ground concrete test tank which measures 667 feet 

long (the approximate length of two football fields) by 65 feet wide, by 11 feet deep. It is 

filled with 2.6 million gallons of crystal clear salt water. Ohmsett is also the premier 

training site for spill response personnel from State and Federal Government agencies, 

private industry and foreign countries. This includes the U.S. Coast Guard Strike Team 

personnel. MMS now manages Ohmsett as part of its mandated requirements to ensure 

that the best and safest technologies are used in offshore oil and gas operations. On July 

 72 Id. 73 Id. 74 A New Direction for Federal Oil Spill Research and Development: Hearing Before the Subcomm. on Energy & 

Env’t of the H. Comm. on Sci. & Tech., 111th Cong. 65 (June 4, 2009) (Statement of Minerals Management Service, 

Department of the Interior), available at http://edocs.dlis.state.fl.us/fldocs/oilspill/federal/49820.pdf [hereinafter 

MMS Statement]. 75 Oil Pollution Act of 1990 § 7001(c)(7), 33 U.S.C. § 2761(c)(7). 76 See MMS Statement. 
Originally Released November 22, 2010

Updated January 11, 2011

13

22, 2009, Ohmsett celebrated its 17th anniversary under MMS management and to date 

24 countries have made use of the facility.77

MMS’s annual funding dedicated to OHMSETT has increased modestly over time —

from $1.0 million annually during the 1992 to 1998 period, to $1.5 million from 1999 to 2002, to 

$3.3 million in 2006, falling to $2.7 million for the last three years. 78 Senator Robert Menendez 

of New Jersey has alleged that OHMSETT is underfunded.79

C. NOAA Oil Spill Research

Although the Oil Pollution Act does grant NOAA the authority to carry out oil spill 

response R&D, NOAA does not currently have a funded oil spill R&D program.

80 From 2004 to 

2008, the base appropriation for its Office of Response and Restoration, whose responsibilities 

include developing scientific tools to support oil spill preparedness and response, steadily 

declined to approximately 30% below the amount budgeted by the President in 2008.

81 From 

2004 to 2007, an earmark from Senator Judd Gregg of New Hampshire allocated $2 to $3 

million per year to an oil spill response partnership involving NOAA and the Coastal Response 

Research Center at the University of New Hampshire.

82 NOAA has not funded spill response

R&D since 2007.

83

D. EPA Oil Spill Research

EPA’s oil spill response R&D budget was $2.5 million in 1992 and 1993, but has 

averaged less than $1 million annually for the last decade. 84 Because EPA is the lead federal 

response agency for spills in the inland waters, its limited research addresses mitigation, fate and 

effects, and spill flow characteristics, and is conducted through the Office of Research and 

Development’s National Risk Management Research Laboratory. The program’s objective is to 

provide environmental managers with the “tools, models, and methods needed to mitigate the 

effects of oil and biofuel spills on ecosystems.” 85

 77 Id. 

 

78 E-mail from Ken Lane, Department of Interior, to Commission Staff (Oct. 19, 2010) (on file with Commission 

staff); E-mail from Raya Bakalov, Department of Interior, to Commission Staff (Oct. 28, 2010) (on file with 

Commission staff). Note that from 2003 to 2007, “capital improvements were made and additional funds were 

appropriated.” Id. 79 See Letter from Senator Robert Menendez to Secretary of the Interior Ken Salazar (June 21, 2010), available at

http://menendez.senate.gov/imo/media/doc/20100621ltr_OHMSETT.pdf. 80 E-mail from Margaret Spring, NOAA, to Commission Staff (Nov. 16, 2010) (on file with Commission staff); infra

Appendix A.

81 Spring E-mail. 82 Interview by Commission Staff with NOAA Officials (Nov. 18, 2010); Press Release, Sen. Gregg Announces 

$20.2 Million for a Variety of Granite State Ocean, Fisheries Research (July 13, 2006) (on file with Commission 

staff); infra Appendix A. 83 Spring E-mail. Note that NOAA’s Office of Response and Restoration received its full budget requests of $17.3 

million and $19.1 million in 2009 and 2010 respectively. Neither budget included oil spill research funding. Id. 84 See infra Appendix A. 85 A New Direction for Federal Oil Spill Research and Development: Hearing Before the Subcomm. on Energy & 

Env’t of the H. Comm. on Sci. & Tech., 111th Cong. 5 (June 4, 2009) (Statement of Environmental Protection 

Agency), available at http://edocs.dlis.state.fl.us/fldocs/oilspill/federal/49820.pdf. 
Originally Released November 22, 2010

Updated January 11, 2011

14

* * *

Oil spill research provided for in the Oil Pollution Act has never been appropriated to 

even half the authorized levels. Indeed, NOAA — which played a major role in the Deepwater 

Horizon response — currently receives no funding for oil spill research. The Commission may 

wish to consider recommending that the Oil Pollution Act be amended to ensure that federal 

agency oil spill R&D efforts are fully funded to levels authorized by the Act, as intended by 

Congress. Oil Pollution Act spill research funding, including funding for OHMSETT, could 

become a mandatory appropriation, rather than one subject to the normal appropriations 

process.

86 Such a legislative change would be complicated: A mandatory appropriation would 

qualify as direct spending, meaning it would be “scored” and thus require a corresponding 

budget offset under pay-go rules.87 Nevertheless, the Commission may determine that a

mandatory appropriation is worth these additional complications. 

III. Incentives for Response R&D

As discussed in Section I and Section II, both industry and the federal government have 

underfunded response R&D. Closing this funding gap for federal agencies would involve 

appropriating more money for R&D in the budgeting process and potentially considering a 

mandatory appropriation to ensure that funding continues after the political salience of the 

disaster has begun to diminish. The Administration has already taken steps in this direction: On 

September 13, 2010, President Obama added $9 million (on top of the $6 million already 

requested) to his 2011 budget request for “oil spill research.”88 The $9 million is intended to “be 

used to address key research gaps brought to light by the Deepwater Horizon oil spill in the Gulf 

of Mexico and the associated spill containment and response efforts.”89 As the President wrote 

in requesting the additional $9 million, “[d]eep oil and gas spill containment capabilities need to 

be improved, along with the understanding of how best to respond to deep oil and gas spills.”90 

Closing the response R&D funding gap for industry is decidedly more complex. Industry 

has not invested significant resources in response R&D because it lacks the incentive to do so. 

Federal regulations and market forces have conspired to create disincentives for oil companies to 

invest significant resources in response R&D. The following section discusses some of these 

regulations and market forces, and suggests a few new incentives that could be implemented to 

encourage private sector investment in response R&D. 

 86 Telephone Interview by Commission Staff with Sandy Davis, Congressional Budget Office (Oct. 14, 2010). 87 Id. 88 Letter from President Barack Obama to House Speaker Nancy Pelosi (Sept. 13, 2010), available at

http://www.whitehouse.gov/sites/default/files/omb/assets/budget_amendments/amendment_09_13_10.pdf. 89 Id. 90 Id. The $9 million budget increase for 2011 would be added to BOEMRE’s oil spill research budget, but would 

be “coordinated with other Federal agencies and non-Federal partners.” Id. $9 million “would be fully offset by 

proposed reductions to other accounts within the Department of the Interior.” Id. 
Originally Released November 22, 2010

Updated January 11, 2011

15

A. Market Forces and Countervailing Incentives

The single largest disincentive to response R&D seems to be the market itself — more 

specifically, that there is not much of one. A few for-profit spill response companies, such as 

National Response Corporation, do exist. For the most part, however, the market for equipment 

to clean up spills on the scale of the Deepwater Horizon spill is tiny. Only cost-insensitive and 

independently wealthy entrepreneurs can afford to sink money into spill response companies that 

may be a decade or two away from generating revenue, and then only for a limited period of 

time. To be prepared for a catastrophic spill, companies must invest in technology that may not 

be used, and may not generate revenue, for many years.

This section discusses three possible ideas for stimulating the response R&D market. 

This list of ideas is not meant to be exhaustive.91 In truth, the response R&D market needs “belts 

and suspenders” — multiple stimuli to grow the market necessary to support development of 

technology capable of responding to the next catastrophic spill. None of the ideas discussed in 

this section is likely to be sufficient on its own. 

i. Revised Insurance Requirements

To stimulate response R&D, the Commission may wish to consider revising the current 

insurance requirements for offshore facilities. The Oil Pollution Act of 1990 mandates 

demonstration of financial responsibility but limits an offshore facility’s liability for economic 

and natural resources damages to $75 million per incident. MMS/BOEMRE Oil Spill Financial 

Responsibility (OSFR) guidelines require leaseholders of rigs in the Outer Continental Shelf to 

demonstrate a minimum financial responsibility of $35 million per 35,000 barrels of “worst case 

oil-spill discharge,” up to a maximum of $150 million.

92 Operators can demonstrate financial 

responsibility with surety bonds, guarantees, letters of credit, third-party insurance, and — in the 

case of certain major oil companies, including BP — self insurance. 

Potential revisions to the offshore drilling insurance regime — including (1) increased 

OSFR requirements, (2) increased liability requirements, and (3) independent third-party 

monitoring requirements for companies that self-insure — are explored in other Commission 

work. In the context of this analysis of response R&D, it is important to highlight that such 

regulatory changes could be an effective way to stimulate the development of clean-up 

technology. 

 91 Professor Jody Freeman of Harvard Law School, for example, has advocated allowing companies “that go beyond 

the legal minimum requirements, pay for backup safety systems and provide superior worker training for spill 

response” to receive drilling permits more quickly or reductions in their royalty payment requirements. See Jody 

Freeman, The Good Driller Award, N.Y. Times (June 30, 2010). Similarly, regulations rewarding drillers that 

proactively invest in superior spill clean-up technology, or clean-up technology R&D, with “carrots” such as quicker 

drilling permits or reductions in royalty payments could stimulate the existing market for clean-up technology. Id. 

As another example, the Commission staff has heard that one government agency, in its review of the Deepwater 

Horizon spill response, is considering whether to recommend reform of the entire OSRO certification process. If 

for-profit and non-profit spill response companies were required to invest in clean-up technology and related R&D 

in order to receive the Coast Guard’s official OSRO certification, this, too, could serve as powerful clean-up 

technology market stimulus.

92 See 30 C.F.R. § 253.13.
Originally Released November 22, 2010

Updated January 11, 2011

16

By monetizing risk in the form of periodic premiums, insurance companies make it easier 

for firms to understand and justify measures to reduce risk. A firm that self-insures may have 

difficulty determining expected liabilities and justifying precautionary measures to accounting 

officers based on internal calculations of expected liabilities. On the other hand, a firm presented 

with a periodic premium, and options for higher or lower premiums based on loss experience or 

undertaking particular safety measures, may find it easier to justify improved safety measures. If 

liabilities are borne by insurance carriers, carriers will also have a strong incentive to promote 

new safety techniques and methods by encouraging other institutions (including insured firms) to 

engage in such research. They may also require certification by non-profit organizations or 

agencies devoted to identifying best practices. And they may provide a vehicle for developing or

improving collective response mechanisms, such as the Marine Well Containment Company or 

MSRC.

93

 

More robust OSFR and liability requirements, coupled with independent monitoring 

requirements for companies that self-insure, could force insurers or third parties to oversee 

precautions that drillers take to prevent spills and reduce spill impacts (which, for the most part, 

they do not currently do94). Adding this layer of private oversight to offshore drilling could, in 

turn, encourage the development of new technologies to mitigate these risks. In this way, 

changes to the offshore drilling insurance requirements could stimulate response R&D. 

One key caveat: Numerous industry sources have told Commission staff that the offshore 

energy insurance market currently has a finite amount of liability insurance capacity —

somewhere in the range of $1.25 billion to $1.5 billion per company.

95 Similarly, working 

capacity for OSFR insurance certification is currently no more than $200 million per company.96 

In the current market, any revisions to the insurance regime would likely be short-circuited by 

these market capacity limits. 

In reaction to the Deepwater Horizon spill, major insurance and reinsurance firms have 

increased premiums charged to firms engaged in exploration and production activities by as 

much as 50%.

97

 93 See supra note 14.

 Perhaps seeing these rising rates as a business opportunity, on September 12, 

2010, Munich Re announced a new “concept for offshore oil drilling” whereby it proposes to 

write project-specific (as opposed to company-specific, which is the current model) liability 

policies of $10 to $20 billion. Under this plan, a consortium of insurers or reinsurers, including 

Munich Re, will provide liability insurance on a project-by-project basis. The plan cannot work 

without scale — i.e., participation by all or most offshore rigs in the Gulf. Munich Re appears to 

believe that legislative changes to the offshore insurance requirements could yield the scale 

94 Telephone Interview by Commission Staff with Offshore Energy Insurance Brokers (Sept. 10, 2010); Telephone 

Interview by Commission Staff with Dr. Robert Hartwig, Insurance Information Institute (Sept. 3, 2010). 

95 Rawle O. King, Cong. Research Serv., R41320, Deepwater Horizon Oil Spill Disaster: Risk, Recovery, and 

Insurance Implications (July 12, 2010); see also Offshore Energy Insurance Brokers Interview. 96 King, Deepwater Horizon Oil Spill Disaster: Risk, Recovery, and Insurance Implications. 97 See Liability and Financial Responsibility for Oil Spills Under the Oil Pollution Act of 1990 and Related Statutes: 

Hearing Before the H. Comm. on Transp. & Infrastructure, 111th Cong. (June 9, 2010) (Testimony of Dr. Robert 

Hartwig, Insurance Information Institute), available at

http://transportation.house.gov/Media/file/Full%20Committee/20100609/Hartwig%20Testimony.pdf. 
Originally Released November 22, 2010

Updated January 11, 2011

17

necessary for its product to succeed.98 However, there seems to be considerable skepticism from 

the insurance industry about whether the Munich Re plan — specifically, its stated aim of 

creating $10 to $20 billion in capacity — is viable.99

ii. A Technology Incubator

The establishment of a clean-up technology “incubator” could function as a much-needed 

stimulus for response R&D. A possible model is In-Q-Tel, the non-profit venture capital vehicle 

affiliated with the Central Intelligence Agency. A brief history of In-Q-Tel posted on the 

company’s website notes that, “by the late 1990s, the pace of commercial IT innovation was 

outstripping the ability of government agencies — including the CIA — to access and 

incorporate.”100 Because of this technology gap, “[i]n 1998, CIA identified technology as a top 

strategic priority, and set out a radical plan to create a new venture that would help increase the 

Agency’s access to private sector innovation . . . . IQT was tasked with building a bridge 

between the Agency and a new set of technology innovators.”101 There are parallels with the 

clean-up technology deficit discussed in this paper: A “radical plan”102 to incentivize offshore 

drillers and OSROs to access innovation is needed. Although In-Q-Tel is designed to “bridge” 

government and “technology innovators,”103 a new incubator modeled on In-Q-Tel could act as 

valuable bridge between industry and spill technology innovators.

In-Q-Tel seems to have been a success,104 and may provide a viable model for a spill 

technology incubator. There is, however, a crucial distinction between intel-tech and spill-tech: 

The market for intelligence-oriented technology is much larger, and more developed, than the 

market for oil spill response technology. Dozens if not hundreds of government agencies 

provide end-users for any technology developed by companies seeded by In-Q-Tel. Even if an 

incubator were funded to encourage the development of response technology, few entrepreneurs 

would be interested in tapping into these funds unless the market for the technology grows. 

Thus, a spill technology venture capital fund would succeed only in concert with other market 

stimuli. 

A spill clean-up technology incubator could be funded by Congress (like In-Q-Tel) or by 

BP. On May 24, 2010, BP pledged $500 million over a ten-year period to create the Gulf of 

Mexico Research Initiative. 105 Among the stated goals of this Initiative is “to develop improved 

spill mitigation and oil detection, characterization and remediation technologies.”106

 98 See Munich Re, Catastrophe Cover for Offshore Oil Drilling (Sept. 12, 2010) (on file with Commission staff); 

Telephone Interview by Commission Staff with Munich Re Executives (Sept. 17, 2010).

 BP has 

promised that these funds will be administered by an independent advisory council, and that all 

99 See Interview by Commission Staff with Insurance Industry Executive. 100 In-Q-Tel History, www.iqt.org/about-iqt/history.html. 101 Id. 102 Id. 103 Id. 104 Terence O’Hara , In-Q-Tel, CIA’s Venture Arm, Invests in Secrets, Wash. Post (Aug. 15, 2005). 105 Jake Sherman, BP Offers $500 Million to Study Oil Spill Impact, Politico (May 24, 2010). 106 Letter from David C. Nagel, Executive Vice President BP America, to U.S. Representatives Lois Capps & Lynn 

C. Woolsey (Sept. 23, 2010) (on-file with Commission staff). 
Originally Released November 22, 2010

Updated January 11, 2011

18

grants will be funded through a request-for-proposals process.107

 

 Although the limited 

information available suggests that the Initiative will be geared toward funding research by 

scientists at academic institutions, the Commission may wish to consider recommending that a 

portion of BP’s $500 million grant, if not a separate BP grant, be dedicated to seeding a spill 

technology venture capital fund loosely modeled after In-Q-Tel. 

iii. R&D Tax Credit

A third potential incentive to consider is a spill clean-up technology R&D tax credit. On 

September 4, 2010, President Obama asked Congress to increase and permanently extend an 

across-the-board research credit that has existed for businesses, in some form, since 1981.108 In 

December 2010, Congress enacted a temporary R&D tax credit as part of the bill extending 

Bush-era tax cuts.

109 The Commission may also wish to recommend Congress pass a response 

R&D tax credit specific to the oil industry. Any proposal would have to establish that the credit 

would not apply to research on and development of technology related to drilling but only to spill 

clean-up R&D. The credit could benefit a wide spectrum of companies, from majors such as 

ExxonMobil and ConocoPhillips to small entrepreneurs. Although there would undoubtedly be 

opposition to extending a new tax credit to major oil companies that are already profitable, the 

long-term benefits of the incentive may significantly outweigh the long-term costs.

B. Regulatory Disincentives

Public reports and interviews by Commission staff have pinpointed a few specific federal 

regulations that may create disincentives for response R&D investment by industry and OSROs 

— in particular, two regulations relating to mechanical recovery equipment, and one relating to 

open-water oil testing requirements. 

Before examining these specific regulations, however, it is worth briefly considering

whether two overarching regulatory concepts — (1) a performance-based “safety case” approach 

and (2) a progress “road map” created and overseen by an independent advisory board — could 

incentivize response R&D. Although both of these approaches are discussed in more detail in 

other work by the Commission and its staff, the Commission may wish to consider whether these 

approaches could, in addition to providing benefits analyzed in this other work, encourage 

response R&D. 

First, the “safety case”: The prescriptive approach of the federal regulatory structure

relating to oil spills (e.g., prescribing daily recovery capacities for equipment and allowable 

percentages of oil in oiled-water discharge) may serve as a fundamental disincentive for response 

R&D. Under the current regime, companies are incentivized to meet certain set laws and 

regulations — no less and no more — instead of general performance or function standards. At 

 107 Id. 108 Jackie Calmes, Obama to Pitch Permanent Research Tax Credit, N.Y. Times (Sept. 4, 2010). 

109 Ryan J. Donmoyer & Peter Cohn, Congress Passes $858 Billion Tax-Cut Extension, Sends to Obama for Signing, 

Bloomberg (Dec. 17, 2010). 
Originally Released November 22, 2010

Updated January 11, 2011

19

least by some accounts, the prescriptive model “encourage[s] a passive attitude.”110

 

 Companies

have no incentive to develop better technology or more creative approaches to spill response as 

long as their current technology clears the bar set by existing regulation. The regulator is the 

guarantor of compliance. 

A performance-based “safety case” approach could encourage innovation by giving 

companies the freedom to determine what solutions they will pursue to meet general 

performance requirements. Because the companies, not the regulators, are the guarantors of 

performance, they have the incentive to continually innovate to meet high-level standards in 

more efficient and effective ways. The British “safety case” system, for example, “puts the 

burden — and ultimate legal and financial responsibility — on oil and gas companies to figure 

out the myriad ways something could go wrong on a drilling rig or production platform, then 

show regulators the practices and technologies that would be used to avoid or deal with the 

problems.” 111 

Like Great Britain, Norway has adopted a “safety case” approach to offshore drilling

regulation in which government sets performance standards to be achieved and leaves 

compliance to operators.112 By all accounts, Norway has been able to develop much more robust 

spill clean-up technology. 113 In his testimony before the Commission on September 28, 2010, 

Doug Suttles of BP emphasized that clean-up technology developed in Norway proved to be a 

great asset in the spill response,114 and press reports confirm Mr. Suttles’s claim that U.S. 

responders put Norwegian technology to use in the Gulf of Mexico. 115 Although there is no 

conclusive link, Norway’s technological success may be due, at least in part, to that country’s 

“safety case” approach.116 

As an alternative to the more generalized “safety case” performance-based model, the 

Commission may wish to consider recommending formation of an independent advisory board, 

staffed with experts from industry and government, to create a detailed “road map” for how 

clean-up technology should develop over the ensuing years and decades to keep pace with 

exploration technology, as well as to monitor the industry’s adherence to the board’s guidelines. 

Professor Jody Freeman of Harvard Law School has analyzed the independent advisory board 

concept in detail for the Commission in her memo entitled Structural Options for Improving 

MMS/BOEM Decision Making on Offshore Drilling. While her analysis considers the advisory 

board as a monitor of drilling safety, her advisory board concept could be modified to add clean-

 110 Petroleum Safety Authority of Norway, From Prescription to Performance in Petroleum Supervision (Mar. 3, 

2010), http://www.ptil.no/news/from-prescription-to-performance-in-petroleum-supervision-article6696-79.html. 111 Neela Banerjee, U.S. Looks to British Model to Improve Offshore Drilling Safety, L.A. Times (Oct. 24, 2010) 

(emphasis added).

112 Id. 113 A number of Norwegian organizations have made a commitment to new technology development, including the 

Norwegian Oil Spill Control Association, a non-profit cooperative of industry, research institutions, and 

government, and the Norwegian Clean Seas Association for Operating Companies, which maintains a technology 

development program that solicits and selects technology proposals to research. 114 See also Interview by Commission Staff with Oil Company Executive (“[T]he best of the best is in Norway.”). 115 Patrick McLoughlin, Norwegian Environment Minister Praises BP’s Gulf Spill Response, Platts Commodity 

News (Aug. 17, 2010). 116 See Petroleum Safety Authority of Norway, From Prescription to Performance in Petroleum Supervision.
Originally Released November 22, 2010

Updated January 11, 2011

20

up technology development to its list of responsibilities. The Interagency Coordinating 

Committee created under the Oil Pollution Act (discussed above) was designed with similar 

goals in mind, but has not served as an effective response R&D planner and monitor. A new

advisory board would need to incorporate key structural features (e.g., an independent staff and 

budget, a tailored charter, and reporting lines to an agency head and Congress) to guarantee 

independence and authority that the Interagency Coordinating Committee does not possess. 

Useful models for such a board include the Nuclear Waste Technical Review Board, the Clean 

Air Science Advisory Committee, and the independent National Transportation Safety Board.

The Department of the Interior’s recently announced plan to set up an Ocean Energy 

Safety Institute “that would research and develop technologies to prevent, contact and clean up 

future offshore oil spills”117 could serve many of the same functions as the kind of independent 

advisory board Professor Freeman has proposed. According to information provided by the 

Department to the Commission, one of the Institute’s primary responsibilities will be to create a 

“road map” for technology development that will lead to sound and safe offshore drilling 

operations.118 The Institute will include representatives from industry and academia as well as 

the Department of the Interior, the Department of Energy, and Coast Guard — but, noticeably, 

not the EPA. 119 The limited details available suggests that the Institute will report to the

Secretary of the Interior but does not indicate whether it will incorporate structural features 

designed to ensure independence, such as a dedicated staff and budget, and a tailored charter.120 

Although three existing regulations are discussed in the following section, the 

Commission may wish to consider whether the best way to incentivize response R&D is in the 

context of a new overarching approach to regulation of offshore drilling — such as a 

performance-based “safety case” or a progress “road map” approach — rather than by tweaking

the specifics of existing regulations. 

i. Effective Daily Recovery Capacity Regulations

Coast Guard guidelines create minimum Effective Daily Recovery Capacity (EDRC) 

requirements for all oil recovery equipment listed in response plans that companies propose to 

use to recover discharges.

121 MMS/BOEMRE regulations contain a similar EDRC 

requirement. 122

Both Coast Guard and MMS/BOEMRE regulations detail specific formulas for 

calculating EDRC. Specifics aside,123

 117 Stephen Power, Salazar Pitches Drilling Safety Institute, Wall St. J. (Oct. 21, 2010); see also Juliet Eilperin & 

Steven Mufson, Interior Considers First Deepwater Drilling Permits Since BP Spill, Wash. Post (Oct. 22, 2010); 

Press Release, Department of the Interior, Salazar Proposes Ocean Energy Safety Institute (Nov. 2, 2010), available 

at http://www.doi.gov/news/pressreleases/Salazar-Proposes-Ocean-Energy-Safety-Institute.cfm.

both the Coast Guard and the MMS/BOEMRE formulas

118 Non-Public Document from the Department of the Interior. 

119 Id. 120 Id. 121 33 C.F.R. § 154, Appendix C. 122 See 30 C.F.R. § 254.44. 123 Coast Guard regulations allow for two methods of calculating EDRC for oil recovery devices. See 33 C.F.R. 

§ 154, Appendix C (EDRC Formula in Section 6.2.1: throughput rate (i.e., pump rate) x 24 x efficiency rate of 20%; 
Originally Released November 22, 2010

Updated January 11, 2011

21

are flawed in one sense: Neither takes adequate account of the efficiency with which response 

equipment recovers oil. The regulations allow companies to measure response equipment by 

liquid, not oil, pumping ability. There is no regulatory incentive for companies to list on their 

mandated response plans — and thus invest in, or encourage OSRO investment in — more 

efficient oil recovery equipment. Companies need only show that they have access to equipment 

with the minimum liquid pumping capacity mandated by the EDRC regulations. Big, simple 

pumps clear this low regulatory hurdle. Oil recovery rates are usually overstated because the 

formulas to do not accurately reflect how much oil, as opposed to liquid, equipment actually 

pumps.

124

According to MSRC CEO Steve Benz, this loophole has hampered the development of 

spill clean-up technology. EDRC regulations disincentivize oil companies from developing their

own more efficient oil recovery devices or providing additional funding to MSRC for research 

on and development of its own more efficient equipment. The metric by which the vessels are 

measured to satisfy the regulations is simply how much liquid they can take up, not how much 

oil they can recover.

125

Whether Mr. Benz’s explanation is a legitimate rationale or an excuse for MSRC’s own 

lack of R&D, it does seem that for-profit companies such as National Response Corporation 

have emerged as competitors to the non-profit MSRC in part because they take advantage of this 

regulatory gap to provide companies with a less expensive alternative to MSRC.126 National 

Response Corporation’s equipment is less efficient than MSRC’s equipment, yet still EDRCcompliant.127 With cheaper equipment, National Response Corporation can offer lower fees than 

MSRC.

128 Independent and smaller companies, including Marathon Oil and Anadarko

Petroleum Company, have opted for the less costly National Response Corporation, and are not 

members of MSRC.

129

 

EDRC Formula in Section 6.3.1: average oil recovery rate x hours per day usable). MMS/BOEMRE regulations 

allow for only one method of calculating EDRC, which is largely similar to the Section 6.2.1 method in the Coast 

Guard regulations. See 30 C.F.R. § 254.44(a). 124 See API Report at V-9; E-mail from William Holt, U.S. Coast Guard (ret.), to Commission Staff (Oct. 13, 2010) 

(on file with Commission staff). 

125 See MSRC Interview; see also API Report at V-9. 126 MSRC Interview; Candito & Robinson Interview. 127 See MSRC Interview; Candito & Robinson Interview; Stephens, Oil Industry Cleanup Swamped by BP Spill

(“When MSRC was formed, the oil companies envisioned it as uniquely poised to clean up catastrophic spills. But 

over time, a competing approach arose. Seacor Holdings, based in Fort Lauderdale, saw a business opportunity in 

the post-Valdez cleanup standards. It formed the for-profit National Response Corp., and set out to provide many of 

the same services as MSRC at lower prices. While MSRC had a dedicated fleet, NRC retrofitted a handful of ships 

and contracted with commercial shippers for access to their fleets in an emergency. Before long, some MSRC 

customers were moving to NRC. MSRC cut costs, including research into better ways to recover spilled oil. ‘That 

was much to the detriment of the organization,’ said David McLain, a former MSRC consultant.”). 128 MSRC Interview; Candito & Robinson Interview (noting that National Response Corporation offers lower fees 

than MSRC because it is “more innovative,” “more cost-effective,” and can “do things more efficiently as a forprofit”).

129 See MSRC Interview. 
Originally Released November 22, 2010

Updated January 11, 2011

22

Commission staff believes that the EDRC requirements should be revised to include a 

reliable, dynamic efficiency measure.

130

ii. EPA Open-Water Testing Permit Process 

The simple mathematical EDRC formulas should be 

changed to accurately reflect oil, not liquid, pumping ability. As is, the regulations and the 

manner in which they are applied do not encourage companies to include the most efficient oil 

spill recovery equipment in response plans. Revised EDRC requirements could serve to

incentivize companies and OSROs to invest in response R&D, with the goal of developing more 

efficient skimmers and other recovery equipment. 

The EPA’s open-water oil testing permit process is a second area of regulation that may 

have a chilling effect on certain types of spill response research and thus warrant revision. 

Section 311(b)(3)(B) of the Clean Water Act permits the discharge of oil “in quantities and at 

times and locations or under such circumstances and conditions as the President may, by 

regulation, determine not to be harmful.”131 Using this statutory authority, EPA has issued an oil 

discharge permit regulation, which provides that the Administrator may permit the discharge of 

oil “in connection with research, demonstration projects, or studies relating to the prevention, 

control, or abatement of oil pollution.”132 

Although it is technically possible to obtain an EPA permit to spill on the open ocean,133

Senator Mary Landrieu of Louisiana, among others, has complained about the fact that a permit 

has not been granted “for at least 20 years.”134 The EPA, however, maintains that the lack of 

open-water testing is due to a lack of initiative by industry.135 According to the EPA official in 

charge of the open-water testing permit process, the agency is amenable to granting open-water 

testing permits and, indeed, did grant a permit to the only applicant to have completed the

application process (in the mid 1990s). 136 That does not, however, satisfactorily explain why 

U.S. companies and institutions have tested clean-up technologies with oil on open water in 

Canada and Norway, countries that do allow for controlled oil spills.

137

 130 The Coast Guard EDRC guidelines also require that “[a]ll equipment identified in a response plan must be 

designed to operate in the conditions expected in the facility’s geographic area,” 33 C.F.R. § 154, Appendix C, but 

the Coast Guard’s EDRC calculation does not explicitly mandate a numerical adjustment for different environments. 

That is, Coast Guard EDRC regulations do not take into account that a single piece of equipment could have one 

EDRC capacity in the Gulf of Mexico and another in the Arctic. The Commission may also wish to examine this 

aspect of the Coast Guard EDRC regulation.

 Presumably, if the 

problem were solely a lack of industry initiative, U.S. companies would not journey abroad to 

test technologies in open-water spills. 

131 33 U.S.C. § 1321(b)(3)(B). 132 40 C.F.R. § 110.5. 133 See EPA, Application for EPA Permits to Discharge Oil for Research Purposes, Interim Guidelines (Mar. 29, 

2010). 134 Sen. Mary Landrieu Says U.S. Doesn’t Allow Open-Water Oil Spill Practice, Politifact.com (June 28, 2010), 

http://www.politifact.com/truth-o-meter/statements/2010/jun/28/mary-landrieu/sen-mary-landrieu-says-us-doesntallow-open-water-/. 135 Telephone Interview by Commission Staff with Nick Nichols, EPA (Oct. 14, 2010). 136 See id. 137 See, e.g., Dickens Associates Ltd., Sintef, University Centre at Svalbard, Boise State University, 2006 Svalbard 

Experimental Spill to Study Spill Detection and Oil Behavior in Ice: Summary Field Report (Apr. 12, 2006), 

available at http://www.boemre.gov/tarprojects/569/SummaryFieldReport.pdf (detailing team of U.S. and 

international scientists, including scientists from Boise State University, conducting oil-on-ice study in Norway). 
Originally Released November 22, 2010

Updated January 11, 2011

23

Perhaps because it is too cumbersome or burdensome,138 the EPA’s permitting process 

has resulted in a de facto ban on intentional open-water spills for testing purposes in the U.S.139 

Separate from the question of whether this ban hurts the quality of response R&D, it could 

disincentivize R&D. To promote the development of new clean-up technologies, the 

Commission may wish to consider recommending that the EPA revise its procedures to

encourage applications for open-water testing permits and to streamline the permitting process. 

Open-water testing would, of course, risk environmental impacts, but the OHMSETT 

facility in New Jersey, where every test of oil on water inside the U.S. is currently conducted,

cannot replicate all open-water testing conditions. The Commission should balance the costs and 

benefits of using OHMSETT against the costs and benefits of open-water testing. For example, 

one source told the Commission staff that OHMSETT is “pretty expensive,” especially for small 

entrepreneurs who could potentially play an important role in developing clean-up technology.

140 

The Department of the Interior has insisted that OHMSETT’s fees are, in fact, “a very small 

fraction of the cost to conduct open water tests,”141 but this cost comparison likely assumes that 

open-water oil testing can only be done outside of the U.S., which gives rise to additional 

expense. 

OHMSETT may also have a “full agenda,”142 which could create meaningful time-tomarket delays for entrepreneurs. For example, a representative from a major oil company told 

Commission staff that the facility has been reserved for all of August and September 2011 for an 

oil spill technology competition.143 In response to an inquiry about OHMSETT’s capacity, the 

Department of the Interior passed on the following information to Commission staff:

Although the Ohmsett facility has a use rate of over 80%, it has been able to 

accommodate all clients that give sufficient notice of their testing requirements and pay 

for the test or training at least 30 days in advance. This lead time is necessary to deposit 

the funds into a reimbursable account and to have a contracting officer approve a task 

order. BOEMRE is looking at the possibility of having the contractor collect and 

disburse the client’s funds. This would eliminate the need for a task order proposal and 

the subsequent review.144

 138 The EPA’s Application for EPA Permits to Discharge Oil for Research Purposes, Interim Guidelines is twenty 

pages long and requires applicants to submit information on Test Justification, Site Justification, Assessment of 

Environmental Effects, Assessment of Non-Environmental Effects, Regulatory Compliance, Public Participation, a 

Safety Plan, and Peer Review.

139 See Deluge of Oil Highlights Research and Technology Needs for Effective Cleanup of Oil Spills: Hearing 

Before the Subcomm. on Energy & Env’t of the H. Comm. on Sci. & Tech., 111th Cong. (June 9, 2010) (Testimony 

of Dr. Nancy Kinner), available at

http://science.house.gov/publications/hearings_markups_details.aspx?newsid=2854. 140 See Nichols Interview. 141 Lane E-mail. 142 See id. 143 Interview by Commission Staff with Oil Company Executive (referencing the Wendy Schmidt Oil Cleanup X 

Challenge, www.iprizecleanoceans.org). 144 Lane E-mail.
Originally Released November 22, 2010

Updated January 11, 2011

24

Even if OHMSETT’s capacity is not an issue, the requirements of 30 day advance notice for 

payment and testing, along with “a task order proposal and subsequent review,” are hurdles that 

could potentially deter small entrepreneurs. 

In short, the Commission should keep OHMSETT’s strengths and weaknesses in mind in 

assessing whether the EPA’s apparently de facto open-water testing ban serves as a response 

R&D disincentive worthy of revision.

145

iii. EPA Regulations on Discharge of Oiled Water

EPA discharge regulations require all equipment (including oil spill response equipment) 

capable of sucking up oiled water to return 99.9985% oil-free water to the ocean. 146 Public 

reports have cited this regulation as an impediment to the development of oil-water separation 

technology.147 Kevin Costner pointed to the EPA’s fifteen-parts-per-million requirement as a 

significant obstacle in his company’s extended struggle to bring its centrifugal force oil-water 

separator to market.148 According to one report, “although his [Mr. Costner’s] machines are 

effective, the water they discharge is still more contaminated than environmental regulations 

allow. He could not get spill-response companies interested in his machines . . . without a 

federal stamp of approval.”149 Similarly, owners of the Taiwanese A Whale pointed to this 

requirement as having delayed that vessel’s participation in the spill response.150

 145 A paper describing “lessons learned” from the Coast Guard’s 2002 Spill of National Significance exercise 

recommends changes to “agencies policies and regulations prohibit[ing] the controlled spilling of oil in the 

environment to test response technologies.” Commander Michael Drieu et al., Lessons Learned from 2002 Spill of 

National Significance (SONS) Exercise Gulf of Mexico, 2003 International Oil Spill Conference (Undated), 

available at http://www.iosc.org/papers/IOSC%202003%20a470.pdf. 146 Section 311 of the Clean Water Act, as amended by the Oil Pollution Act of 1990 (codified at 33 U.S.C. § 1321), 

prohibits the discharge of harmful quantities of oil into U.S. waters (including discharges that may affect natural 

resources in the U.S. Exclusive Economic Zone — which extends 200 miles offshore), and mandates that the 

President define, by regulation, what he deems to be discharges of harmful quantities of oil. 33 U.S.C. § 1321(b)(3) 

and (4). Pursuant to this mandate, the EPA defines harmful quantities of oil as those that “(a) [v]iolate applicable 

water quality standards; or (b) [c]ause a film or sheen upon or discoloration of the surface of the water . . . .” 40 

C.F.R. § 110.3. In turn, Coast Guard regulations prohibit discharge of water with an oil concentration of greater 

than fifteen parts per million (see 33 C.F.R. § 151.10) — which is generally recognized to be the minimum amount 

of oil that creates a sheen. This Coast Guard regulation is in accord with the International Convention for 

Prevention of Pollution from Ships (the MARPOL protocol). See MARPOL 73/78 Annex I, implemented in the 

United States by the Act to Prevent Pollution from Ships, 33 U.S.C. §§ 1901 et seq. Thus, while the Coast Guard 

regulation (33 C.F.R. § 151.10) defines the amount of oil that creates a sheen, the EPA regulation is the one that 

prohibits the discharge of water with that amount of oil under the Clean Water Act. 

147 See e.g., Opinion: Paul H. Rubin, Why is the Gulf Cleanup so Slow?, Wall St. J. (July 2, 2010). 148 See Deluge of Oil Highlights Research and Technology Needs for Effective Cleanup of Oil Spills: Hearing 

Before the Subcomm. on Energy & Env’t of the H. Comm. on Sci. & Tech., 111th Cong. (June 9, 2010) (Testimony 

of Kevin Costner), available at http://gop.science.house.gov/Media/hearings/energy10/jun9/Costner.pdf; Fountain, 

Advances in Oil Spill Cleanup Lag Since Valdez. 149 Fountain, Advances in Oil Spill Cleanup Lag Since Valdez. 150 Telephone Interview by Commission Staff with Scott Segal & Kevin Ewing, Bracewell & Giuliani (Oct. 14, 

2010); Paul H. Rubin, Why is the Gulf Cleanup so Slow?; Patrik Jonsson, A Whale to the Rescue: Can SuperSkimmer Turn Tide of Gulf Oil Spill?, Christian Sci. Monitor (July 2, 2010). 
Originally Released November 22, 2010

Updated January 11, 2011

25

The fifteen-parts-per-million regulation is grounded in international precedent,151 and the 

Federal On-Scene Coordinator has the authority to waive the requirement during a spill.

152 

Indeed, the On-Scene Coordinator did waive the requirement for Mr. Costner’s technology and 

the A Whale during the Deepwater Horizon response. However, the Commission should 

consider whether the regulation should be revised with respect to testing of equipment that is not 

part of an actual spill response. If clean-up technology companies could more easily obtain an 

EPA “stamp of approval” to test decanting equipment that did not discharge 99.9985% oil-free 

water, this might break down another potential barrier to the development of new technology. 

IV. Conclusion

The facts show that industry and the federal government underfunded response R&D, 

and, as a result, clean-up technology used during the Deepwater Horizon spill was dated and 

inadequate. But did this resource gap actually hinder the response? Would the Gulf of Mexico, 

Louisiana’s marshes, and beaches in Alabama and Mississippi be cleaner today if industry and 

government had dedicated significant and sustained funding to response R&D since 1990?

Certain commentators and industry representatives have argued in public reports and to 

the Commission staff that more response R&D dollars would not have made much of a 

difference. According to this argument, R&D dollars are more efficiently directed toward 

prevention as well as containment technology that serves to prevent spills from occurring, rather 

than toward response technology that removes oil from water after a spill has occurred. 

According to a top executive at one of the major oil companies, “response is only a three to five 

percent solution.”153 Once a spill has occurred and oil is in the water, there is only so much 

technology can do. As one Coast Guard Admiral involved in the spill response told the 

Commission staff, “boom is not a panacea . . . . [The] [b]est way to capture the oil was always at 

the source.” 154 Following this logic, available R&D dollars should be dedicated to prevention 

and containment because, as one member of the spill-response community put it, “you need to 

prevent the fire in the first place.”155

The Commission staff believes that there are a number of flaws in this position. To 

summarize a few:

• Data shows that response was much more than a “three to five percent solution” for this 

spill. The government’s Oil Budget Calculator released on November 23, 2010 indicates 

that burning, skimming, and chemical dispersion addressed a total of 24% (1.2 million

 151 See supra note 146. 152 40 C.F.R. § 122.3(d). The EPA’s Application for EPA Permits to Discharge Oil for Research Purposes, Interim 

Guidelines “encourages the use of accidental spills (also known as ‘spills of opportunity’) for field testing. An 

average of more than 65 accidental oil spills greater than 40,000 gallons occur each year, some of which may be 

suitable tests of new spill response technologies. The Agency suggests that potential applicants for 40 CFR 110.5 

permits work with the appropriate Regional Response Team (RRT) to explore the possibility of conducting research 

on accidental spills instead of intentional spills.” 153 Interview by Commission Staff with Oil Company Executive. 154 Interview by Commission Staff with Coast Guard Admiral. 155 Stephens, Oil Industry Cleanup Organization Swamped by BP Spill. 
Originally Released November 22, 2010

Updated January 11, 2011

26

barrels) of the oil released from the wellhead.

156 Given the size of the disaster, additional 

investment in response R&D could well have paid a dramatic dividend in terms of oil 

recovered and protection of the environment (by, e.g., skimmers and boom). 

• An exclusive focus on prevention and containment is not an in-depth defense. Although 

there can be little doubt that “prevent[ing] the fire in the first place” is the top priority, 

suggesting that companies should invest in containment instead of response precludes a 

valuable redundancy. Given the profits generated by the oil and gas industry, industry 

and government can support both response and containment R&D. 

• Commentary on the efficiency of response R&D spending is speculative. As discussed, 

neither industry nor the federal government has made significant investments in response 

R&D. The technology used in response to the Deepwater Horizon spill was largely the 

same technology deployed to clean up after Exxon Valdez. Thus, any argument about the 

limited potential of response technology is not based on experience. We simply do not 

know what kind of spill response solutions could result from a sizeable commitment by 

industry and government to response R&D.

• Promising response technologies were developed during the spill. With agencies, 

industry, and entrepreneurs intent on developing response technologies for the first time 

in twenty years, promising technologies were developed during the Deepwater Horizon 

spill response period. For example, the subsea application of dispersants, which had

never before been attempted in an oil spill, appears to have been a qualified success. 

Robert Craft, the Mayor of Gulf Shores, Alabama, developed a beach cleaning machine 

that effectively scooped up tarballs and oil from beaches. BP ordered at least twenty of 

these machines.

157 One Coast Guard officer told Commission staff that certain response 

technology ideas submitted during the spill response will undergo testing at the Coast 

Guard’s R&D facility in Connecticut.158 And the list goes on. BP and the Coast Guard

are reported to have received hundreds of clean-up technology business plans, and the 

Commission staff has received many business plans itself. The spill caused the once 

miniscule market for response technology to expand, albeit temporarily, and with this 

expansion came new technological developments. 

The Commission staff believes that a multi-pronged approach to R&D spending is more 

desirable than focusing R&D resources solely on prevention and containment. The impacts of 

the Deepwater Horizon spill would have been mitigated by better clean-up technology. The 

federal government and industry must take the steps necessary to increase research funding and 

incentivize development so the Exxon Valdez-era skimmers and boom used in the Deepwater 

Horizon spill are replaced by more effective technology in the response to any subsequent Spill 

of National Significance. As the report for President Nixon’s 1969 Panel on Oil Spills put it: 

 156 Federal Interagency Solutions Group, Oil Budget Calculator Science and Engineering Team, Oil Budget 

Calculator, Deepwater Horizon, Technical Documentation 39-40 (Nov. 2010), available at

http://www.restorethegulf.gov/sites/default/files/documents/pdf/OilBudgetCalc_Full_HQ-Print_111110.pdf. 157 Ryan Dezember, BP Agrees to Buy Tractor-Pulled Beach-Cleaning Rigs for Gulf Shores, Mobile Press-Register 

(June 8, 2010). 

158 Interview by Commission Staff with Coast Guard Captain. 
Originally Released November 22, 2010

Updated January 11, 2011

27

“Adequate public funds must be provided, and these funds must be commensurate with the job 

that is to be done. Placing a man on the moon is a job which could not have been funded in the 

tens of millions of dollars. Although the development of a technology for handling oil spills in 

the open ocean is not the same order of magnitude as developing a technology to place a man on 

the moon or to build a nuclear energy system, the principle is the same.”159

Suggestions for the Commission’s Consideration:

 

• Public reports are correct: There is indeed a response R&D funding gap. Industry has 

committed little to no funding to in-house response R&D. Key OSROs are underfunded, 

and dedicate few if any resources to response R&D. 

• The Commission may wish to recommend that language in the Oil Pollution Act be 

revised to guarantee the full oil spill research authorization provided for in the Act, as 

originally intended by Congress. The Commission may also wish to recommend an 

amendment to guarantee sustained and additional funding for OHMSETT. 

• To stimulate the spill clean-up technology market and incentivize related R&D, the 

Commission may wish to recommend revisions to offshore drilling liability and insurance 

requirements; funding an incubator venture capital fund to invest in clean-up technology; 

and/or a spill technology R&D tax credit.

• To incentivize response R&D, the Commission may wish to recommend that Effective 

Daily Recovery Capacity regulations be revised to give companies the incentive to list 

and employ the most efficient recovery equipment. 

• As additional response R&D incentives, the Commission may wish to recommend that 

the EPA streamline its permitting process for open-water testing and loosen its oiledwater discharge requirement for technology testing purposes. 

 159 Office of Sci. & Tech., Exec. Office of the President, First Report of the President’s Panel on Oil Spills, The Oil 

Spill Problem (1969), reproduced at the Richard Nixon Presidential Library (on file with Commission staff).
Originally Released November 22, 2010

Updated January 11, 2011

28

Appendix A

AGENCY OIL SPILL RESEARCH FUNDING

$ in millions

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

USCG 0.0 5.6 4.6 3.2 3.2 5.0 3.5 3.5 3.5 3.5 3.5 3.5 3.5 2.0 2.0 0.5 0.5 0.5 0.5 N/A

MMS 0.0 5.3 5.3 6.4 6.4 6.4 6.1 6.1 6.1 6.1 6.1 6.1 7.0 7.0 6.9 6.9 6.3 6.3 6.3 6.3

NOAA 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.0 1.9 3.0 3.0 0.0 0.0 0.0 0.0

EPA 2.5 2.5 2.1 1.8 1.3 1.0 1.0 1.0 1.0 0.9 0.9 0.9 0.9 0.9 0.8 0.8 0.8 0.7 0.6 0.7

Total 2.5 13.4 12.0 11.4 10.9 12.4 10.6 10.6 10.6 10.5 10.5 10.5 13.4 11.8 12.7 11.2 7.6 7.5 7.4 7.0

Source: Congressional Research Service estimates; data provided to Commission staff by agencies.