Louisiana’s settlement with BP is a raw deal. U.S. District Court Judge Carl Barbier previously ruled that British Petroleum (BP) acted recklessly in disregarding warning signs that the well wasn’t properly sealed against gas leaks. With that ruling, the state of Louisiana was poised to hold BP accountable for the 2010 disaster in the oil giant’s Macondo field off the Louisiana coast, an explosion that killed 11 workers and coated the Gulf and its shorelines with more oil than any spill in U.S. history.
A strong settlement holding BP accountable would have served as a powerful and effective disincentive to oil and gas operators everywhere, essentially telling them: if you risk Louisiana lives and damage our coast and fisheries, you will be held accountable.
But that is not what happened.
The state’s settlement with BP is low (only $6.8 billion will go to Louisiana). In fact, the company faced a $13 billion maximum fine under the Clean Water Act, based on the court’s ruling that BP is liable for spilling 3 million barrels of crude oil (24 percent less than federal prosecutors had claimed). The settlement on that Clean Water Act fine was only $5.5 billion.
To make matters worse, BP’s payments are spread out over 15 to 18 years, and most could even be tax-deductible as “ordinary” business costs. In other words, the government appears poised to give BP a tax windfall and force American taxpayers to shoulder more tax burden.
The U.S. Public Interest Research Group has pointed out that the tax benefits potentially reduce the overall deal from $18.7 billion to about $14 billion. Further, $1 billion of the settlement is money that BP has already spent, not money to be invested in our coast. And the protracted nature of the payments means that inflation makes the real value of the settlement far less than even those lowered amounts. BP’s stock price has actually increased on news of the settlement.
BP’s payments to the state of Louisiana’s are far less than they should be. And yet the private lawyers hired by Louisiana Attorney General Buddy Caldwell to represent the state will be rewarded handsomely for this debacle, raking in over $25 million for their work.
Why did this happen?
Barbier was right: BP did act recklessly, and did disregard warning signs that the well was dangerous. BP never paused in its secret, high-stakes gamble with Louisiana workers’ lives and the possibility of catastrophically polluting the coast and fisheries. The reason BP took this risk is that there was no disincentive strong enough to stop it from doing so.
In court, the prospect of a heavy fine was an opportunity to fix the system and make clear that no oil company should gamble with Louisiana lives and our coast. We rely on government officials to protect us by ensuring that real disincentives to dangerous behavior exist.
If there is one thing we have learned from this tragedy, it is that when there is no disincentive to stop an oil company from operating recklessly, it will act recklessly. And government officials are not holding reckless companies accountable. Recall that after the spill, U.S. Rep. Joe Barton, R-Texas, apologized to BP for what he called a “shakedown.” His response shows a mentality that pervades all levels of government. There was a time when oil companies were expected and required to abide by law, but this is no longer the case.
How did we get to this point?
The insult added to injury is that Caldwell paid top dollar to get this bad result. Caldwell entered into big-dollar, no-bid contracts with private law firms. The state’s lead private attorney, Allen Kanner, is paid $600 per hour for his work. The outside firms racked up well over $15 million by January 2013, and as of April 2015, Caldwell had spent over $25 million on legal fees. Contrast this with Alabama’s attorney general, who used state attorneys and had spent only $200,000 on legal fees for outside lawyers as of January 2013. Barbier criticized Caldwell for having “apparently no qualms about paying substantial legal fees to multiple lawyers.”
The no-bid process of using state money to pay private lawyers must be halted immediately. It is unseemly that most of the private firms hired by Caldwell to work on the BP case were also donors to his political campaign. At a moment when Louisiana is facing a budget crisis that threatens the whole state, we cannot afford to give tens of millions of dollars to private law firms when the state has attorneys on staff who are perfectly capable of handling the case at a fraction of the cost.
Our coast has been carved up and polluted for generations.
- When these oil companies pollute and damage this precious resource, it is an insult to all Louisianans.
- It’s an insult to the commercial fishermen and sportsmen who rely on a healthy ecosystem.
- It’s an insult to all of us who depend on the coast for hurricane protection.
- It’s an insult to the oilfield workers who rely on their bosses to minimize the risk of death.
- It’s an insult to the oystermen whose business depends on oil companies not polluting the oyster beds.
When oil companies do not act carefully, we need the state to meaningfully enforce the law and require these companies to pay for the damage they’ve caused. The BP settlement is yet another demonstration that this state’s political system is broken.
Lt. Gen. Russel Honore led the U.S. Army response to Hurricane Katrina. Now retired from active military service, he commands the Green Army, a citizen uprising in defense of Louisiana’s environment and the best interests of the general public.