By now, it’s no secret that many coastal residents aren’t happy with the proposed settlement between BP, the federal government and the five Gulf Coast states. They have until Dec. 4 to make their thoughts known to the U.S. Department of Justice before the consent decree is finalized.
But this is more than simply wanting a pound of flesh from BP after the oil spill. The final settlement consent decree provides for $5.5 billion in Clean Water Act (CWA) civil penalties. That means the actual penalty assessed ($1,724 per barrel of oil) is 60 percent less than the maximum allowable under law.
Why does that matter to coastal residents?
In 2012, Congress passed the Resources and Ecosystem Sustainability, Tourist Opportunities, and Revived Economies of the Gulf Coast States (RESTORE) Act. The law redirects 80 percent of those CWA penalties in a manner that affords local and regional officials significantly more control over restoring the economic and environmental damage inflicted on their communities.
The R Street Institute, where I also work, has tracked restoration efforts on the coast and even developed a scorecard for evaluating RESTORE Act projects, but what strikes me most is how the proposed consent decree impacts the very nature and scope of coastal restoration efforts.
The consent decree reduces the maximum funds available through the RESTORE Act process from $10.97 billion to $4.40 billion. Control over billions of restoration dollars appears to have shifted away from the impacted communities to state governments, in the form of economic damage payments, and to the federal government, through natural-resources damages.
Let’s be clear. This isn’t a case of excessive verdicts, crazy tort laws or judges gone wild. More than a year ago, U.S. District Judge Carl J. Barbier found that BP acted with “gross negligence” that resulted in 11 deaths and tremendous environmental and economic damage.
While any settlement requires compromise, such a significant CWA penalty reduction against a party with clear culpability for damages raises significant questions.
The shift also has coastal residents in Alabama nervous that Montgomery will spend the state settlement funds with little regard to actual harm to communities on or near the water. The State of Florida has pledged 75 percent of its economic damages to the eight counties most impacted by the spill. It’s anyone’s guess as to whether Alabama will follow a similar path.
If that weren’t enough to chap coastal residents who endured the spill, Forbes contributor Robert Wood notes that BP should be able to take around $15.3 billion in payments as a tax deduction.
Not only will impacted communities likely have less say over restoration efforts, the timeframe for payments potentially changes the types of projects themselves. Coastal communities realized many of the economic and environmental harms almost immediately, but BP has until 2031 or later to make most of the payments. Local governments, coastal communities and even states won’t receive massive lump sums of money to invest in major infrastructure projects unless they’re willing to issue bonds and pay fees to essentially accelerate the timeline.
The financial certainty and finality of the settlement shouldn’t be dismissed, but it’s important for coastal residents to voice their thoughts, if they haven’t already. While it’s unlikely that the decree will change, the only option left is to comment now or forever hold your peace on settling one of the worst disasters ever to hit the Gulf Coast.