Environment
 

BP settlement: Tens of millions for lawyers, not nearly enough for the coast

The explosion of the Deepwater Horizon rig off the Louisiana coast triggered what is widely regarded as the worst oil spill in U.S. history.

File photo

The explosion of the Deepwater Horizon rig off Louisiana triggered the worst oil spill in U.S. history.

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

Green Army

Lt. Gen. Russel Honore

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.  

 

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  • Thanks, Lt. Gen. Honore, for such bold opinions and for exposing La. Atty. Gen. Caldwell’s payoffs to, and kickbacks by, his jackleg lawyer “buddies” in a no-bid process that only perpetuates the “spoils system” exposed by political pundits 100 years ago (see graph). Also for the stern reminder to Big Oil that they ain’t gonna run this State, without a fight from platoons of ragin’ Cajuns. Hopefully Judge Barbier will reject the “settlement” — didn’t BP try to welsh on the last one? — and fine BP the full $14B penalty, collectible almost immediately (not over 15 years), as the US Supreme Court last week refused to hear BP’s last-ditched appeal.

  • Tim

    Concur! Thank you, General, for speaking out, and thank you, The Lens, for lending him your megaphone.

    Peace,

    Tim

  • nickelndime

    If you want to hide anything from AG Buddy Caldwell – you should know the old joke by now – PUT IT IN A LAW BOOK.
    Seriously folks – you know what state you are in, right? And you know what country you are in, right?
    If you think you are being represented properly, then get on in-in that voting booth and pull that switch again.
    Greed, corruption, and unspeakable opulence, and oh yes….billable hours.
    Louisiana should hope that water gets HER first.
    Find out what the escape plan is for all of the Louisiana officials – they all have one.
    The rest of us (expletive deleted) unfortunates (yes, you middle class, count yourself in – you should have known better ) can either leave voluntarily or if you stay, you will be escorted out in a truck, Cajun style.
    07/10/2015 1:38 AM DST USA

  • nickelndime

    “The pen is mightier than the sword,” but that was way before spray paint and Mitch and his crew of deputy deputies, headed by Andy, were headed toward at least four monuments. THOMAS JEFFERSON – you is in peril, Boy! Well, WE could have told you how this was going to end. LaToya is smoking in the back room.
    07/10/2015 3:33 AM DST USA

  • nickelndime

    In Biblical terms, “…the first shall be last, and the last…first…” Well, if that doesn’t describe the state of the State of Louisiana, then nothing does.

    Here’s a post for you, boyz. ASP and I can’t claim it, but it’s a spectacular one:

    Reddick CEO, Pao, resigns amid…Her husband is the one who defrauded several Louisiana pensions funds for over $130 million. Her lawsuit against KP was for around $130 million. Coincidence?

    07/11/2015 12:10 AM DST USA

  • nickelndime

    Oh yeah, BTW, yo’ girl, Pao lost her case. which means that she should be headed toward eastern New Orleans real soon. “How much does your Louisiana salary” (how far can you go?) compare with other states? 07/11/2015 12:21 AM DST USA

  • Kelly M. Haggar

    1. Tax windfall? The fine is not deductible and never has been. The damage payment is deductible and always has been, When an airliner crashes, both the wrongful death and the injury payments are deductible. If the airline gets fined, that money is not deductible. However, the “hull loss” – – the insurance payment for the aircraft itself – – might be taxable as income. If they buy another airplane, it’s not income, so it’s not taxed. But if they instead keep that money, then it IS income and they do get taxed on it. It’s called an “involuntary conversion.” In effect, they sold the airplane to the insurance company. Anyone who dispassionately thinks about it ought to see the logic of it. That’s been the U.S. tax law for decades. If you don’t believe me, call a good CPA or a law prof who teaches income tax.
    2. My better half is a geologist. The less money “the coast” gets, the better – – less will be wasted on ineffective ideas doomed to fail, such as the lower diversions. Fewer false hopes of better hurricane protection will be raised. Less will be spent on geotech (rock-squeezing and sand locating) masquerading as structural geology. More money will be wasted by not taking transforms and crustal deformation and tectonics and faulting into account. OTOH, money spent on relocating people who cannot be defended, on bolstering places and things we’ve decided to keep regardless of the cost or utility . . . that money cannot be too much in any practical terms. I doubt the wealth of the world will suffice to keep the present New Orleans this size, this shape, and in this location for as long as there is a U.S, flag, but – – so far – – the other 49 seem to have signed on. (Killing the fishing is just a bonus.) If the other 49 were misguided enough to actually give us $50B, we’d likely try to build things as pulsatingly stupid as Morganza-to-the-Gulf.
    BTW #1, if a court were to order Mr. “I want my life back” be given a cigarette and a blindfold, I’d be perfectly happy handing out the ammunition. BP had a certain reputation in the industry for being a bunch of corner-cutting jerks.
    BTW #2, the Elvis imitator appears to be sunk for this fall, which will NOT break my heart.

  • nickelndime

    Look up “Worst Case Scenario.” It’s under “L” for LOUISIANA. Cross-references are in “C” for CORRUPTION and CALDWELL, but actually you can cross reference “the term” in any letter of the alphabet – representatives and senators, federal and state government officials, law firms, consulting…
    It goes all the way up the food chain. “Everybody knows the dice are loaded. Everybody throws with their fingers crossed…” This isn’t going to turn out well for anybody in the U.S. The other “49” are deluding themselves if they think it (whatever it happens to be) won’t happen to them. Most people don’t have an escape plan – they can’t afford it. But I can tell you who does have escape plans, and it does NOT include staying in the U.S.
    07/11/2015 12:53 PM DST USA

  • nickelndime

    This is DEJAVU ALL OVER AGAIN. Does anybody believe that any of these public agencies are worried about anything except the money!? The money is already spent.

    REPOST:
    Here’s a list of the amounts New Orleans-area agencies have approved thus far:

    Jefferson Parish: $53.1 million
    City of New Orleans: $45 million
    Jefferson Parish School Board: $32.7 million
    Orleans Parish School Board: $22.7 million
    St. Tammany Parish: $16.8 million
    St. Tammany School Board: $15.4 million
    St. Bernard Parish: $9.3 million
    City of Kenner: $9.3 million
    Lafourche Parish: $8.1 million
    City of Gretna: $3.3 million
    City of Slidell: $3 million
    City of Mandeville: $2.1 million
    Reporter Ben Myers contributed to this report.

    http://www.nola.com/education/index.ssf/2015/07/st_tammany_school_district_acc.html#comments

    07/12/2015 12:11 AM DST USA

  • nickelndime

    This is pure B$. ASP and I will continue to give “the homeless,” on the esplanades and on the neutral grounds of this city (until LaToya shuts us down), CA$H, and they may spend it any which way they can – for the stores that let them inside. WE think it is money well spent. This other stuff – in the billions – is pure B$.
    07/12/2015 12:19 AM DST USA

  • nickelndime

    Can you just imagine how Mitch and the City of New Orleans is going to spend its $45 million BP money! It’s already gone, Baby. 07/12/2015 12:22 AM DST USA

  • nickelndime

    Jefferson Parish will receive $ 51.3 million in BP money. Orleans Parish will receive $45 million. Would somebody care to explain why and how Jefferson Parish should receive $ 6.3 million more than Orleans Parish. WE are not playing favorites here. WE are just looking at the difference between the claim numbers and WE are wondering how the City of New Orleans “managed” to submit a claim below that which Jefferson Parish submitted. NEVERMIND…07/12/2015 12:35 AM DST USA