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Gulf Coast States at Odds on Penalties for Oil Spill

Source: NY Times

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Posted on 19 Nov 2012 by Neilson

BP penaltiesWith BP's agreement on Thursday to plead guilty to 14 criminal charges and pay $4.5 billion in fines and other payments in connection with its 2010 oil spill in the Gulf of Mexico, Gulf Coast politicians are now eyeing a much bigger potential windfall from the company: $20 billion or more in civil pollution penalties for the spill.

But the negotiations over those penalties -- including which states get the money, how quickly, and what it can be used for -- could be more contentious than the talks that led to the criminal settlement.

Officials with the Justice Department, who are leading the discussions, are not simply representing the federal government, but a number of other governments, including those of the five gulf states. And not only do some states have a different vision of a just settlement than federal officials do, they also disagree among one another. In some cases, leaders within a single state cannot agree on the best course of action.

All those differences have complicated progress toward a civil settlement, according to several people with knowledge of the discussions. On Thursday, both BP and the Justice Department said they intended to take the matter to trial in late February.

''Greed has always tripped up individuals and companies and states,'' said Representative Jo Bonner, a Republican whose district includes the Alabama coastline. ''We should be unified in holding the Department of Justice's feet to the fire, just like they said they were holding BP's feet to the fire.''

Under the criminal settlement, $.4 billion paid by BP will go to environmental restoration, overseen by the National Fish and Wildlife Foundation, a nonprofit organization created by Congress. Projects in Louisiana will get half the money, and the rest will be split among the other gulf states -- Florida, Alabama, Mississippi and Texas.

There are two significant varieties of civil remedies to come from the spill: penalties under the Clean Water Act and claims under the Natural Resources Damage Assessment. A settlement would most likely include some payments through both mechanisms, though the difficult question is how much would be paid out under which one. And there is intense disagreement over which is preferable.

Under the Natural Resources Damage Assessment process, which arose out of the Oil Pollution Act of 1990, state and federal agencies total the environmental harm caused by the spill and send the responsible party a bill. All the money is administered by federal agencies and must be spent on environmental recovery. And the penalties, which could run in the tens of billions of dollars in the BP case, are tax-deductible for the polluter.

Payments under this process are directly tied to environmental damages, so a related BP settlement would benefit Louisiana the most, since that state experienced and continues to experience the worst of the spill.

For this reason, Garret Graves, the chief coastal adviser to Gov. Bobby Jindal of Louisiana, said that pathway could be the most helpful for the coast. ''Under N.R.D.A., 100 percent of the money goes to the gulf for recovery,'' he said.

The drawback is that the assessment can take years, and must be arrived at through findings by different scientists, which can vary widely.

The Clean Water Act calls for a penalty based on the number of barrels spilled, with much higher damages to be awarded if the polluter is found to have been grossly negligent in causing the spill. In the past, the money from these penalties, which in the BP case could add up to $21 billion, would go to the United States Treasury.

But in June, Congress passed a law, called the Restore Act, which directed that four-fifths of the penalty money in the BP spill be divided up among the gulf states, to be spent mostly outside federal control.

The passage of the Restore Act required quite a bit of horse trading, particularly in a Congress not known for demonstrations of bipartisanship.

Senator Mary Landrieu, the Louisiana Democrat who was lead sponsor of the act, maintained that her state had felt the brunt of the spill, but she arrived at a compromise with other gulf state lawmakers. Of the money that goes to the gulf states, 35 percent would be divided evenly among them. About 30 percent of the funds would be divided based on the extent of damage, and another 30 percent would go to creating and carrying out a comprehensive master plan covering the entire Gulf Coast.

The other compromise involved what the money could be spent on. While Senator Landrieu and some state officials wanted the money in Louisiana to be spent on coastal restoration and other environmental projects, officials from other states wanted more leeway.

Alabama officials in particular wanted the freedom to spend money on economic projects like port expansion and road building, rather than exclusively on environmental needs. They argued that the economic damage to Alabama from the BP spill was disproportionate to the state's relatively small coastline.

Senator Landrieu has trumpeted the Restore Act, saying that its funds would reach the coast more quickly than natural resources damage claim money, and that states would have greater control.

''We really need this money now,'' she said on a conference call with reporters on Thursday. ''It is not going to help us to get this money in 20 years.''

She has found agreement among some other gulf state lawmakers, including Representative Bonner, though to a lesser extent with the other senator from Louisiana, David Vitter.

''From a Louisiana point of view, I think it's a trade-off,'' said Senator Vitter, a Republican. ''N.R.D.A. gives us a significantly bigger percentage of the money and Restore gives us fewer federal strings attached. I think there's been a lot of negotiating about how N.R.D.A. would be used. Since it's a significantly greater share of the money, I think our negotiators are trying to push things in that direction.''

Of course, more money does not automatically mean a healthy Gulf of Mexico, said David Uhlmann, a law professor at the University of Michigan and former federal prosecutor of environmental crimes.

''At the end of the day, there's only so much we can do to bring the gulf all the way back to life,'' he said. ''That's a process that, more than anything else, will take time -- and may not ever be entirely successful.''


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