In this aerial photo taken in the Gulf of Mexico, an oil slick is seen as the Deepwater Horizon oil rig burns Wednesday, April 21, 2010. (AP Photo/Gerald Herbert)As it works to settle civil and criminal charges from the 2010 Gulf oil spill, the U.S. Department of Justice has proposed a deal that would appear to satisfy both the federal government and BP Plc.
That deal, according to officials briefed by the Justice Department, would be structured to give the federal government more control over the billions of dollars in fines paid by BP as a result of the spill, shifting that authority away from the affected states.
The settlement, one of several alternatives proposed by the government in recent weeks, would divert a greater portion of the fines toward a Natural Resource Damage Assessment (NRDA), reducing the amount paid in civil penalties for violating the Clean Water Act.
NRDA fines flow through the U.S. Treasury and have relatively strict guidelines requiring them to be spent on restoration of wildlife and habitats. They’re also tax deductible – a major incentive for BP.
Clean Water fines, by comparison, are not deductible and would flow primarily to the five Gulf Coast states through the Restore Act, a bipartisan bill that was signed by President Barack Obama on July 6.
The law gives communities harmed by the spill greater flexibility in determining how to use the recovery money, with eligible uses ranging from expansion of oyster beds and fish hatcheries to construction of roads, bridges and convention centers.
Louisiana a potential winner
With states already making plans for how to spend their share of the money, the proposed settlement would dramatically alter the distribution of funds along the Gulf Coast.
Louisiana, which took the brunt of environmental damage from the spill, potentially could reap hundreds of millions of additional dollars through NRDA. Florida, with its vast coastlines, would also be likely to see an increase in its share of the fines.
Both states would see more money coming from a Democratic president than from their Republican governors, possibly swaying some votes in an election year.
The biggest losers? Alabama, Mississippi and Texas, where economic harms would not be reimbursed by NRDA funds.
“A higher proportion of fines settled under the Clean Water Act clearly carries the greater benefit for affected communities along the Alabama Gulf Coast,” said U.S. Sen. Richard Shelby, R-Tuscaloosa. “A settlement weighted toward NRDA would significantly shortchange Mobile and Baldwin counties. There is no question about it.”
Both the Justice Department and BP have consistently declined to comment on any discussions about a potential settlement. A BP spokesman repeated that position when contacted on Sunday, and the Justice Department declined to comment today.
The proposed settlement was revealed by the Justice Department in communication with the states during the week of Sept. 17, according to state and federal officials interviewed by the Press-Register. Several said they learned about the proposal following a Sept. 20 meeting at the Justice Department in Washington, D.C.
The officials declined to be identified because of the confidential nature of the negotiations with BP and because they were not authorized to speak for the government.
Alabama opposition
Elected officials in Alabama voiced strong opposition to the proposed deal, saying it would make an end run around the Restore Act.
“The idea that the Justice Department would attempt this, less than three months after the law was passed, is absolutely unacceptable,” said U.S. Rep. Jo Bonner, R-Mobile. “It’s an arrogant slap to the people of the Gulf Coast and the members of Congress who passed Restore.”
A spokeswoman for Gov. Robert Bentley said the governor “will oppose any effort by the federal government or by BP to undermine the principle of local control by artificially reducing the amount of money that flows through the Restore Act.”
Alabama Attorney General Luther Strange said that, regardless of a deal, the state would continue to fight until it received fair compensation for its losses.
Separate from the settlement negotiations, Alabama and Louisiana sued BP in federal court with a trial scheduled to begin Jan. 14 in New Orleans. Strange said the lawsuit gives Alabama tremendous leverage against BP.
“We’re ready to go to trial. They don’t want to see us in court,” Strange said. “Our motivation is simple: We want the biggest possible judgment or a settlement that makes Alabama whole. We won’t accept anything less.”
Power politics
Politics may also loom large in the ongoing negotiations between the government and BP.
A settlement would represent a coup for the Obama administration just weeks ahead of the Nov. 6 election. BP also has incentive to hammer out a deal and avoid a long, expensive court battle. A ruling of gross negligence could cost the company in excess of $30 billion, according to legal experts. The uncertainty surrounding the case has depressed BP's stock price and stymied a massive campaign to restore its corporate brand.
The negotiations are high-stakes, befitting the biggest environmental catastrophe in U.S. history. The Times of London reported Sunday that talks between BP and the Justice Department had stalled over the government’s insistence that the company pay at least $18 billion.
The British newspaper, citing unnamed company sources, said a settlement deal may not happen until early next year. Reports in July suggested the U.S. was looking for a settlement of $25 billion. The newspaper said that BP’s board was split over whether to pay $18 billion or continue to push for a lower fine in the range of $15 billion.
