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The Economic Impact of the Sea Empress Spillage

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The Economic Impact of the Sea Empress Spillage THE ECONOMIC IMPACT OF THE SEA EMPRESS SPILLAGE Stephen Hill and Jane Bryanj Welsh Economy Research Unit Downloaded from http://meridian.allenpress.com/iosc/article-pdf/1997/1/227/2351652/2169-3358-1997-1-227.pdf by guest on 28 September 2021 Cardiff Business School University of Wales, Cardiff 66 Park Place CardiffCF1 3AS United Kingdom ABSTRACT: The Sea Empress oil spillage has had a substantial by oil spills in terms of welfare losses within a community (Hausman impoverishing effect on what was already a poor part of a poor region. etal, 1995). The major negative impact has been on the local tourism industry, Methodological issues. There are definitional issues surrounding the although the much smaller local fishing industry was also badly hit. concept of "economic loss" (Wall, 1993). This remains a gray area in However, the cleanup operation did provide a much needed, albeit tem- the legal context of claims for oil pollution and other damages resulting porary, injection of local spending. The Sea Empress spillage has also from environmental accidents. One fundamental difficulty in the oper- colored local attitudes to other environmentally sensitive projects, with ation of an oil pollution liability and compensation system has been that long-term consequences that may dwarf the direct effects of the oil of the actual meaning of "pollution damage" itself. spillage. There is little difficulty in establishing a causal relationship between oil spilled and direct damage caused to agricultural land, houses, fishing boats or nets, the fish in fish farms, or any other owned property. How- ever, when there is no direct effect on property and when the physical damage is caused to resources that are not owned, the precise meaning On the evening of February 15,1996, the oil tanker Sea Empress ran and extent of pollution damage in relation to economic loss become aground on the approaches to Milford Haven, spilling over 70,000 tons unclear—particularly for the indirect economic effects of oil spillage. of oil. The final oil spill, which was almost twice that resulting from the Economic loss is not constrained by the actual ownership of resources; Exxon Valdez, will have profound effects on the economy and ecology economic and financial repercussions may extend along several causal of southwest Wales, and of Pembrokeshire in particular. The primary chains (Goldberg, 1994): focus of this study is on Pembrokeshire. Both fishing and tourism indus- tries will suffer as a result of consumer perceptions, in addition to any • Those who had relied upon the continued availability of the dam- physical damage caused to the environment. The arousal of environ- aged asset suffer economic losses; these parties include fishermen, mental awareness in the region may also have some bearing on the plans owners of fish-processing factories and their employees, and those to convert Pembroke Power Station to Orimulsion. dependent on tourist-related industries that rely on the aesthetic and recreational attractions of the beach resource. • Other economic and financial repercussions arise in relation to those concerned with the restoration and replacement of the asset The economic analysis of oil spillage damaged by oil, both from the point of view of the actual owners of resources used during cleanup, and from the point of view of The economic implications of oil spillage. Studies of major inci- effects relating to the short-term provision of support and other ser- dents show that the damage caused by an oil spill is not necessarily in vices for those employed in such operations. proportion to the amount of oil spilled, and that impact assessments must include an economic element. At the time of the Braer incident and in Many of the disputed legal claims arising from oil spillage have the aftermath of the Exxon Valdez, the importance of addressing the eco- related to the difficulties of establishing the extent of relational eco- nomic implications of an oil spill as well as its environmental conse- nomic losses within the local community. In economic terms, the con- quences was recognized at an early stage, as was the need for a com- cept causes similar problems when one is measuring the multiplied prehensive strategy to reduce the scale and duration of impacts on the effects of such losses on the local economy. Shetland community (Cooper and Kinniburgh, 1993). Efforts to assess the economic consequences of oil pollution are fraught with methodological problems. Some studies have sought to evaluate specific aspects of local economic impact through time series Review of the local economy analyses by, for example, the measurement of earnings data (Cohen, 1993). Other econometric applications have sought to develop systems Recent trends in the local economy. The Pembrokeshire economy of taxation or fines, focusing attention on the economic damage caused is already under pressure. It is attempting a precarious transformation of existing activities to meet new market conditions, and the coastal pollu- tion has the effect of frustrating development. Tourism and associated service activities have been the predominant source of what growth has 1. This paper summarizes an earlier report sponsored by the Welsh occurred. Pembrokeshire experiences many of the familiar economic Development Agency and Pembrokeshire County Council. See Bryan problems of peripheral rural areas, such as poorly diversified industrial etal, 1996a. structure, low wages and high unemployment, and an aging population 227 228 1997 INTERNATIONAL OIL SPILL CONFERENCE with high out-migration of young people. Traditionally, its coastline, Table 1. GDP estimates for Pembrokeshire and west Wales with its National Park status, has supported a thriving tourist industry, there has been a successful fishing industry, a range of defense estab- lishments have created demand for services and employment, and high- £m Implied As % Wales As % U.K. wage employment in oil refining and electricity production has been (current) gdp/head gdp/head gdp/head generated. Before the Sea Empress oil spillage, these major elements of activity had already been subject to difficulties. Unemployment in the Pembrokeshire unitary authority of Pembrokeshire is the highest in Wales, and partic- 1984 439 3876 100.9 84.0 ularly acute around the Milford Waterway. The proportion of the popu- 1989 667 5889 93.5 78.2 lation in the work force is low, and many businesses are small, employ- 1994 790 6954 84.0 71.2 ing fewer than 10 people. Self-employment is much higher than in any tuthwesi t Wales other unitary authority in Wales. Labor demand is subject to greater sea- 1984 1106 3879 101.0 84.1 sonal variation than in Wales or the United Kingdom as a whole; unem- 1989 1692 5935 94.2 78.8 ployment is higher in percentage terms, and the reduction in its level has 1994 1972 6976 84.3 71.4 Downloaded from http://meridian.allenpress.com/iosc/article-pdf/1997/1/227/2351652/2169-3358-1997-1-227.pdf by guest on 28 September 2021 been slower than elsewhere. Wage levels are low. In recent seasonal peaks the unemployment level has climbed above regional and national levels. west Wales as a whole, from parity with average Wales gdp per head in Mass domestic tourism, based on weekly units in hotels, guest houses, 1984 to 15% below that average by 1994. Wales is itself a relatively and self-catering accommodations at domestic seaside resorts, has been poor region. Pembrokeshire has a gdp per head about 30% below the in decline. As incomes have risen and air travel has become more exten- U.K. average in 1994—certainly ranking Pembrokeshire alongside sively accessible, tourism in overseas resorts has grown. More recently, some of Europe's poorest regions, and well behind both the Irish and tourism prospects in Britain are reviving as further income growth pro- Spanish averages. The latest gdp per head figures for EU regions refer motes short-break visits, often at the beginning or end of the traditional to 1993 (Regional Trends 31, 1996). In that year Wales had a gdp per season; as core tourist activity becomes ever more saturated, visitors head that was 16% below the EU 15 average, placing the Pembrokeshire seek highly differentiated niches in heritage, nature, and other kinds of gdp per head on a par with Portugal, and substantially below the Span- highly specialized activity. International tourism is also growing, albeit ish average. rather slowly, since the decline in the exchange rate has made Britain an attractive destination. Pembrokeshire has taken advantage of these new kinds of activity, and substantial new investments have been made. Recent changes in the structure of its working population suggest that considerable new employment is being generated as a result. However, The assessment of direct spillage impacts jobs remain predominantly seasonal, part-time, and poorly paid. The Sea Empress spillage affects most aspects of living and working The local fishing industry is centered in Milford Docks. The local in southwest Wales; this study has sought to quantify the more obvious middle-distance trawler fleet has declined as accessible grounds have impacts. The adopted procedure was to assess the direct impacts of the been fished out, and the increasing distance required to reach productive spillage across a range of activities and then to combine these estimates areas has reduced opportunities to reinvest. By 1991, the remaining six (positive and negative) into predictions of the overall direct impacts of trawlers based at Milford failed to even cover their costs, and since then the spillage on the local economy. These overall direct impacts can then locally based activity has been entirely inshore in character. Foreign- be integrated into a model of the local economy that traces through the owned, Milford-registered trawlers still operate out of the port, and their interrelationships between sectors and allows the multiplier or indirect occasional visits support the industry infrastructure, especially the ice- impact of the spillage to be assessed.
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