While the Wall Street Journal and other media outlets report that U.S. prosecutors and BP are close to reaching an agreement that would settle criminal and civil fines associated with the 2010 Deepwater Horizon oil spill, not all analysts are convinced a deal will be reached, especially in light of a fresh oil slick covering an area of the Gulf of Mexico near BP’s blown-out Macondo well.
One of the proposed settlements between the U.S. and BP would send a greater percentage of the fines to Natural Resource Damage Assessment (NRDA). In addition to reducing the amount of fines BP would pay for violating the Clean Water Act, an NRDA settlement would allow BP to deduct the fines from its taxes and would give the federal government more authority over how and where the fines are spent.
NDRA fines go to the U.S. Treasury and are governed by strict rules requiring them to be invested in environmental restoration and the rehabilitation of wildlife and habitats. Fines not levied under the Clean Water Act would effectively kill the Restore Act, a bipartisan effort pushed through Congress and signed by President Obama that would send most of the BP fine money directly to the Gulf states. Gulf Coast officials have expressed high hopes for funds collected under the Restore Act, promising to invest much of them in economic development that would boost annual revenues along the coast.
Janet Tavakoli, the president of Tavakoli Structured Finance, a Chicago-based firm providng consulting to financial institutions and investors, says that the “sweet deal for BP” will be “likely derailed.”
“… let’s not forget the Department of Justice’s findings,” Ms. Tavakoli writes. “The picture for BP is horrendous, even if financial reporters have developed amnesia. The DOJ gave examples of ‘gross negligence and willful misconduct,’ and a ‘culture of corporate recklessness.’”
In the Department of Justice’s own words:
“That such a simple, yet fundamental and safety-critical test could have been so stunningly, blindingly botched in so many ways, by so many people, demonstrates gross negligence.”
On top of these findings, BP also has historically demonstrated a pattern of negligence that continues to this day. For instance, as Ms. Tavakoli explains, Norwegian authorities are investigating an oil and gas leak off Norway’s coast, focusing on BP’s aging offshore facilities. “It raises the issue of whether BP is appropriately maintaining facilities, mothballing facilities that have outlived their useful lives, and training and retraining workers in safety protocols,” Ms. Tavakoli writes.
And now the appearance of a new oil slick in the Gulf of Mexico tied to the Deepwater Horizon disaster, an event that seems to speak to the worry that it’s too early to settle with BP over the disaster, especially if that settlement includes lower civil and criminal fines, giant tax deductions, and less money funneled directly to the coastal communities that sit on the front lines of this ongoing environmental disaster.