Big hat, no cattle. That’s an old adage used in ranch country to describe someone who has big plans but an empty wallet.
And that’s where the RESTORE Act is today.
While the Gulf Coast Ecosystem Restoration Council last week unanimously approved a plan for spending what is expected to be billions in fines against BP for polluting the Gulf during the Deepwater Horizon disaster, at the moment the council only has small change on hand. The federal trial to determine how much BP will pay could be a year or more from completion.
Yet the Initial Comprehensive Plan is noteworthy because it lays down the complicated ground rules five Gulf states will play by when competing for funds.
No state has more at stake than Louisiana. As every local speaker told the Council, Southeast Louisiana currently is losing its race for survival against rising seas and a sinking landscape. The billions that might be coming its way from the RESTORE Act are now seen as critical to the state’s $50 billion Master Plan for the Coast, another great hope desperately short of cattle.
So with the biggest piece of the RESTORE puzzle still to be determined, here are the high points and concerns for Louisiana:
How much will be in the RESTORE Trust Fund?
This has not been settled. The RESTORE Trust Fund has only $320 million in the bank, which is the initial payment from the $800 million fine exacted from Transocean, operator of the rig. The far bigger amount of money expected from BP is still very much subject to debate.
The Clean Water Act sets fines at up to $1,100 per barrel if there is no finding of “gross negligence” and $4,300 a barrel is there is such a finding. The government has claimed 4.9 million barrels were spilled, but U.S. District Judge Carl Barbier has ruled BP can subtract 800,000 barrels that it collected.*
Assuming maximum fines depending on Barbier’s ruling on gross negligence, the total awarded for 4.1 million barrels spilled would be between $4.5 billion and $17.1 billion.
BP is fighting the negligence charge and likely will appeal the ruling on the volume of oil spilled. Some legal experts say proving “gross negligence” is going to be legally challenging.
In an article entitled “Innumerable Shadings of Grey” in the Columbia Business Law Review, Laura Umbrecht reports that one of the few cases to define the term under the Clean Water Act held that “gross negligence requires the intentional failure to perform a manifest duty in reckless disregard of the consequences as affecting the life or property of another; such a gross want of care and regard for the rights of others as to justify the presumption of willfulness and wantonness.”
But the article goes on to point out numerous other cases in which the bar was lower, or even higher.
What it means for Louisiana: Under funding splits prescribed in the law and explained below, the only guarantee Louisiana has is one-fifth of Pot 1, a sum that will fall somewhere between $300 million and $1.8 billion.
How much the state gets from the other pots will be determined largely by the Council. But if it were to draw a one-fifth share from each of the pots, Louisiana’s total take would be between $900 million and $3.42 billion.
How soon will the money come?
The trial is not the only speed bump before Louisiana gets its cut of RESTORE money.
The law requires the U.S. Treasury Department to define proper grounds for use of the funds, as well as how they are to be transferred. The deadline to finish those definitions was last January, but the Treasury Department wasn’t provided funding for the task, a problem exacerbated by the budget sequester.
A budget bill that would solve the problem by transferring as much as $7 million from RESTORE funds to the Treasury is now embroiled in controversy.
Finally, BP likely will be allowed to make payments over a period of years, so Louisiana won’t get a lump sum.
How will the money be divvied up?
The RESTORE Act calls for 80 percent of fines to go to the Council, which will divide the money into five pots.
While an environmental disaster was the impetus for the bill, it was never going to get congressional approval for green initiatives alone. That reality is written into the bill’s title: RESTORE stands for “Resources and Ecosystems Sustainability, Tourist Opportunities and Revived Economies of the Gulf Coast States.”
The only nod to mitigating damage from a spill that occurred 50 miles offshore is a requirement that all projects must be within 25 miles of a state’s coastal zone, including the watersheds of major rivers.
Even that concept is very broad. For example, the entire state of Florida is within its designated coastal zone, which means a project at Walt Disney World could pass muster, at least initially.
What it means for Louisiana: Something is better than nothing. While Louisiana obviously suffered the most direct damage, states that endured little environmental or economic impact were included out of political necessity, to get the bill passed. Otherwise the fines would have flowed into the general treasury, as outlined by the Oil Pollution Act of 1990.*
Pot 1: The Direct Component
This takes 35 percent of the fine ($1.5 billion to $5.9 billion) and divides it equally among the five Gulf states, which can use it for “ecosystem restoration, economic development or tourism promotion.”
There will be little federal control over this pot. Although the projects must fit into one of 12 activities outlined in the law, they are very broad.
What it means for Louisiana: Louisiana’s share from Pot 1, based on the penalty range above, could fall between $287 million and $1.2 billion. The state has passed a law dedicating all the money from Deepwater Horizon settlements to its Master Plan.
Pot 2: Council-selected restoration component
This reserves 30 percent of all fines ($1.3 billion to $5.1 billion) for “ecosystem restoration projects.” The money does not have to be split evenly among the five states. Projects can take place anywhere along the Gulf and will be chosen by a vote of the Council based on the guidelines set out in Section IV of the Comprehensive Plan.
What it means for Louisiana: Based on the criteria set out in the plan for these selections, the state’s Master Plan would seem to give Louisiana a leg up on other states.
This is especially true for criterion No. 3, which lists projects “existing in state comprehensive plans for the restoration of natural resources, ecosystems, fisheries, marine and wildlife habitats, beaches and coastal wetlands of the Gulf Coast region.”
But the competition for dollars will be stiffest here because the Council will vote on which projects to fund. Council members with voting rights include the governors (or their designated representatives) of the five Gulf states and Commerce Secretary Penny Pritzker. She’s from Illinois, so any preference she shows is expected to reflect the Obama administration’s position.
Pot 3: Spill Impact Component
This dedicates another 30 percent of the fine ($1.3 billion to $5.1 billion) to state projects that benefit the environment or the economy. This is another pot that does not have to be divided evenly among the states.
The Council will select projects submitted by the states based on the list of eligible activities set out in the law. They will also consider how much a state was impacted by the spill, using a formula based on three major criteria:
The proximity of the state to the site of the spill
The population of coastal counties (or parishes)
How many miles of shoreline suffered direct impacts
What it means for Louisiana: Louisiana seems to rank at the top of the list based on two of the three criteria: proximity to the spill site and miles of shoreline oiled. And many projects contained in its Master Plan comply with the 12 criteria for eligibility. But the state has only one vote on the Council.
No one expects the other four states to sit back and watch the bulk of this pot go to Louisiana, however. A lot could be determined by coalition-building among the states, as well as lobbying from stakeholders and the Obama administration.
Pot 4: Gulf Coast Ecosystem Restoration Science Program
This will send 2.5 percent ($112.5 million to $427.5 million) plus interest to the National Oceanic and Atmospheric Administration to guide research, including monitoring the health of the Gulf. The agency will work through other federal and state agencies, as well as with nongovernmental groups.
What it means for Louisiana: The state could get financial assistance for research originating here, or it could have important questions answered by research done in the state by federal agencies. Since its Master Plan is aimed at stabilizing the Gulf’s most productive estuary — the Mississippi River delta — relevant research will be eligible for financing from this pot.
Pot 5: Centers for Excellence Research Grants Programs
This sends 2.5 percent of the fines ($112.5 million to $427.5 million) to each state to establish research centers.
In Louisiana, the likely recipient is the Water Institute of the Gulf, established in Baton Rouge to provide independent research informing the state’s Master Plan.
Tepid response to Council’s OK
Given all the uncertainties surrounding RESTORE Act funding — from the total amount of the fine to the details of Treasury Department rulings — it came as no surprise that the crowd in a packed Hyatt ballroom last week didn’t rise in a standing ovation as the Council approved the plan.
Louisiana representatives were perhaps the most subdued, their hope for much-needed cash tempered by the reality that it won’t be coming anytime soon.
Right now, the RESTORE Act remains a big hat, without any cattle at all.
*Correction: The original version of this story misstated the Oil Pollution Act of 1990. It also mischaracterized U.S. District Judge Carl Barbier’s ruling; he has not ruled on how much oil has been spilled, but he has agreed with BP’s argument to exclude 800,000 barrels that the company collected. The story also said the fine is $1,100 per barrel if the judge does not conclude that the spill was due to “gross negligence”; it’s up to $1,100 per barrel. The errors have been corrected.