More than two years ago, in the aftermath of the massive Macondo oil spill, BP signed an unusual agreement with Louisiana’s lieutenant governor.
Under terms of the arrangement, the oil giant agreed to shell out $60 million to promote the state’s damaged tourism and seafood industries. But rather than funnel the money to the state treasury for allocation by the state Legislature, the deal allowed BP to hand off the funds to two nonprofits, making the donation tax-deductible. The attorney general blessed the deal.
Now, Louisiana’s legislative auditor is questioning the arrangement, calling it an end-run around the state Legislature. State Treasurer John Kennedy and several legislators are expressing concern that it could lead to similar spending deals between BP and Gov. Bobby Jindal’s administration as the company begins to pay billions of dollars in fines meant to reverse coastal erosion under the RESTORE Act.
While the act spells out where the money should go and how it would be spent, several groups have begun raising concerns that it could be diverted for other purposes, such as helping Jindal fill several budget holes. The BP deal from two years ago is adding to fears of a possible diversion.
“The arrangement sets a horrible precedent,” Kennedy said in an interview.
Added state Sen. Robert Adley, R-Benton: “It is circumventing sunshine [laws] and the Constitution. We should never do this.”
BP reached the agreement with the lieutenant governor’s office as the oil giant sought ways to overcome the terrible damage — both to the environment and to the company’s image — resulting from the April 2010 Deepwater Horizon rig explosion and oil spill.
In November of that year, BP signed a memorandum of understanding with then interim-Lt. Gov. Scott Angelle to donate $78 million. Of that money, $18 million was to cover the cost of testing Gulf seafood for contamination; $60 million was to be divided equally between the two nonprofit groups, the Community Foundation of Acadiana and the Louisiana Wildlife and Fisheries Foundation.
The agreement called for the community foundation to give its money to all 64 parishes to promote tourism under a plan developed by the lieutenant governor’s office. The wildlife foundation would spend its money on behalf of the state Seafood Promotion and Marketing Board, which is under the direction of the state Department of Wildlife and Fisheries.
A Feb.13 report by the legislative auditor notes that the arrangement allowed the state “to maintain control over the expenditure of the funds, developing procedures and protocols for these expenditures.”
The auditor also reported that “although the executive branch of the State exercised significant control over the disbursements, the funds were neither included within the budgets of these two agencies nor was the Legislature given the opportunity to consider these expenditures while exercising its appropriation authority.”
The parishes had to provide quarterly reports to the lieutenant governor’s office on how they spent the money.
The agreement with BP contained another stipulation that caused the legislative auditor to cast further doubt on whether this was just an arrangement between a private company and two nonprofits. The agreement called for the state to hold the two nonprofits harmless from lawsuits that might arise over how they distributed the money.
Angelle, who is now a Public Service Commissioner, did not return a phone call seeking comment.
A BP spokesman said the company had no comment.
Kennedy noted that the state Constitution requires that all money received by state agencies be deposited in the state Treasury and that the Legislature appropriate the money through the budget process. To Kennedy, even though BP gave the money to two nonprofits, having the state agencies decide how the money would be spent meant that “it’s clearly state money. The law is clear that the Legislature must spend the money. Taking money off the books is wrong, it’s illegal, it’s unconstitutional and it’s unethical.”
The attorney general’s office disagrees. In a 15-page opinion contained in the legislative auditor’s report, the attorney general’s office said the money from BP did not constitute state money because it was a donation given to the two nonprofits and not to the state.
In an interview, Legislative Auditor Daryl Purpera said he fears that the attorney general’s opinion could encourage other state agencies to bypass the Legislature by having companies donate money to favored nonprofit groups. The state agencies would then direct how the money was spent, as in the BP case.
“This [the BP] transaction indicates that future transactions could be done in the same way,” Purpera said. “The funds could go off the books.”
Meanwhile, the two foundations have nothing but good things to say about the arrangement.
“BP sought to find a way to promote industry in an effective manner,” said A. Kell McInnis III, executive director of the Louisiana Wildlife and Fisheries Foundation. “BP wanted to mitigate the damage.”
McInnis is the only full-time employee of his foundation, and he said it normally spends $500,000 to $3 million per year. BP gave the foundation $10 million per year over three years to distribute.
BP gave the Community Foundation of Acadiana $5 million in quarterly installments for it to distribute.
“Community foundations, by their very nature and structure, are well positioned to be a careful conduit of channeling private dollars into the public arena,” Raymond Hebert, the president and chief executive officer of the Acadiana foundation, wrote in a Feb. 8 letter to Purpera.
Steve Cochran, director of the Mississippi River Delta Program for the Washington, D.C.-based Environmental Defense Fund, said outside groups such as his are concerned that lawmakers in Louisiana might try to divert the billions of dollars that will begin flowing to the state this year.
“We’ll be looking closely,” said Cochran, who actually gives the Jindal administration high marks so far for how it plans to spend the BP money. “We want to make sure that the money gets spent where it’s supposed to go.”
State Rep. Cameron Henry, R-Metairie, who like Sen. Adley is a member of the Legislative Audit Advisory Committee, believes that the Legislature provides the best oversight of how BP money is spent.
“It is imperative that BP money be put to areas that suffered the most from BP’s actions,” Henry said.
The legislative audit committee will examine the BP arrangement again at its next meeting, on March 21.
The lieutenant governor’s office defended the arrangement with BP in a Jan. 28 letter to Purpera. “To our knowledge, it is a unique arrangement that serves the public purpose of supporting Louisiana’s seafood and tourism industries while carrying out BP’s legal and business obligations to mitigate damage….”
The lieutenant governor’s office also noted that BP had said it would not have donated the money if it first went into state coffers. By donating the money to the nonprofits, the company could take a tax deduction, noted state Sen. Ben Nevers, D-Bogalusa, at the legislative audit hearing.
Kennedy said that while BP may have donated the money, it was obligated the help Louisiana after the damage caused by the disaster.
“I don’t think BP has any standing to tell the taxpayers of Louisiana how it would spend its money,” Kennedy said. “I found that outrageous.”