October 08, 2010

For Governments, How to Balance Economic and Environmental Interests?

How soon should an industry (or even a single factory) be allowed to return to normal operations after a toxic spill? It's a question of balancing economic and environmental interests. The United States has struggled with this question for months and now Hungary will face it too.

Red toxic sludge poured from an aluminum factory’s containment pond in Hungary on Monday. The sludge flowed through villages, sweeping cars off roads and destroying bridges and homes. Four people died and well over a hundred were injured – many experiencing severe burns and eye irritation from the heavy metals in the sludge. Villagers evacuated from their homes are afraid to return because no one can assure them it is safe. Yesterday morning Reuters reported that the sludge had reached the Danube. The Hungarian government declared a state of emergency in three counties and shut down the factory. The cause of the spill is unknown, although human error is suspected. The president of the company is reported to have asked the Hungarian government to restart operations this weekend.

If the aluminum factory accident had occurred in the United States, would the plant be allowed to start up this weekend? Doubtful.  If the BP oil spill is any indication, the plant would not restart this weekend or any time soon.

After the BP spill, the U.S. government placed a six month moratorium on oil drilling. Although officially the moratorium is limited to deepwater drilling, it is a de facto moratorium on all drilling – the Department of Interior has not issued a new permit for shallow or deepwater drilling since the spill.

The moratorium is set to expire on November 30th, but the Obama Administration is under intense pressure to lift it earlier. Industry is pleading that thousands of jobs will disappear if the moratorium isn’t lifted and (just as importantly) permits aren’t issued soon. The Congressional delegation from the southern states is echoing their cries. More neutral parties have also. The President’s own oil spill commission  also criticized the moratorium, identifying the prolonged moratorium as “a significant factor in the economic harm” to the Gulf region.

A Wall Street Journal article last week reported that the ban may be lifted earlier, but not before new (possibly very costly) safety rules are in place. Industry will also be required to show an improved ability to contain any future spills. "I recognize that there will always be risks associated with deep-water drilling," Secretary of Interior Ken Salazar said [last] Thursday. "We will only lift the moratorium when I as secretary of the Interior am comfortable that we have significantly reduced those risks."

Governments must balance competing environmental and economic interests every day, but in the wake of a toxic spill, what’s at stake is magnified. We’ll have to wait and see how Hungary responds...