Tuesday, October 16, 2012

Why are Jindal and Vitter trying to ditch RESTORE?

Throughout the course of the Obama Administration, Senator David Vitter and Governor Bobby Jindal have prided themselves on their principled conservative defense of state and local autonomy in the face of oppressive federal intervention.   But this week, it seems, they've taken sides with Obama's Justice Department in favor of a federal power grab that could work to Louisiana's detriment. Why would such a thing be happening?

There's some disagreement among lawmakers from Gulf states about how a possibly impending settlement between BP and the US Justice Department could affect each state's share of the damages.

Among key points of contention in a potential settlement is the degree to which BP was negligent, which determines the scale of damages. The Gulf Coast states also are concerned about which laws the government uses to assess penalties against BP, which could affect where the money flows and how it is spent.

BP could be liable for between $5.4 billion and $21 billion in civil penalties under the Clean Water Act alone, depending on whether it were found to be grossly negligent, which it has denied. A settlement at the higher end of that range could imply some negligence on BP's part and empower plaintiffs with pending lawsuits to seek higher damages, legal analysts said. As of last month, the two sides were about $6 billion apart on a final settlement figure, according to one person familiar with the negotiations.

The Justice Department is also weighing whether to levy fines through a provision of the Oil Pollution Act called the Natural Resource Damage Assessment, according to people with knowledge of the negotiations. BP could deduct the costs assessed under the Oil Pollution Act, reducing its tax liability, which legal experts said could be an incentive for BP to settle.

But such a deal could leave the Obama administration vulnerable to criticism that it was giving a tax break to a big oil company weeks ahead of the November election.

Some states are lobbying against heavy use of the Oil Pollution Act, because while damages awarded under the Clean Water Act can cover economic losses, those imposed under the Oil Pollution Act must be used for environmental remediation, and so would be likely to benefit Louisiana because it bore the brunt of the environmental damage. Congress also has guaranteed that 80% of fines under the Clean Water Act would flow to states, while the federal government has greater control of OPA funds.
So there are several balls in play.  The NRDA process could presumably result in funds applied directly to oil spill mitigation, which can mean more money directed proportionally to Louisiana where most of the damage occurred (and is still occurring).  And so naturally we're seeing representatives of other Gulf states balk at that.

GULF SHORES - Alabama political leaders today vowed to fight any deal between the U.S. Department of Justice and BP that would shift control of fine money from the 2010 oil spill to the federal government, away from the Gulf Coast states harmed by the catastrophe.

State and local elected officials said that any settlement with BP should be consistent with the Restore Act, federal legislation signed by President Barack Obama in July. The law stipulates that 80 percent of any penalties under the Clean Water Act should be distributed to the Gulf Coast states.

The 80% rule was installed under a provision of the recent transportation bill. The rule, known as the "RESTORE Act" was heavily pushed by lawmakers and activists in every Gulf state.  Unlike the NRDA process, which appears to tie funds to remediation work related to the BP disaster and leaves the federal government in control of the purse strings, RESTORE would give states greater discretion over how the money is used.

Alabama has appropriated its previous disaster windfalls toward creative investments such as  football condos so no doubt they welcome the opportunity to put their imaginations to work once more.  But Louisiana has anticipated  dedicating RESTORE Act funds toward implementation of its 50 year coastal restoration master plan in accordance with legislation signed by the Governor this summer.  So why are Governor Jindal and Senator Vitter suddenly less enthusiastic about executing that plan?

Sen. Mary Landrieu, D-La., joined most of the Gulf Coast senators in writing a letter asking President Barack Obama to stick to the RESTORE Act, which she sponsored, that would direct 80 percent of the Clean Water Act fines to the five affected coastal states.

But Sen. David Vitter, R-La., withheld signing the letter and is siding with negotiators in Gov. Bobby Jindal’s administration who argue that a greater proportion of funds could go to Louisiana if more of the dollars are funneled through the Natural Resource Damage Assessment process and not only the RESTORE Act.

This is a rare case where Vitter and the Jindal administration may be more aligned with President Obama’s Department of Justice, which is leading the settlement talks.

Jindal and Vitter are ordinarily staunch ideological opponents of encroaching federal power and have demonstrated this principled inflexibility often at the expense of Louisiana's own dire needs. And yet here they are defending a settlement which reportedly places more power in federal hands because, they argue, Louisiana's needs (this time) supersede their ideological purity.  Do we really believe Jindal and Vitter have suddenly lost religion? Or is something else going on? I'm honestly asking here because I don't know. But I do have a few theories. 

First, from the looks of things, the settlement talks as reported indicate that the Justice Department is trying to cut BP a deal. While the public face of the settlement may involve "tough talk" and a penalty in the higher end of that $5-$20 billion range, the trick is shunting that money off onto the NRDA side of things allows BP an advantage it doesn't get under CWA.

The NRDA fines are also tax deductible. That means BP would be able write off hundreds of millions of dollars in penalties, thus easing the financial pain it should feel for operating in such a reckless and destructive manner.

In other words, the deal here is BP loses face publicly, the feds appear to impose a tough penalty, but in exchange, the government subsidizes BP for its trouble on the back end.  So we know what BP's angle is here. It's important to keep in mind that what's good for BP might also be good for BP's co-defendants down the road and that some of these co-defendants are also clients of Senator Vitter.

It has also been suggested to me that Jindal and Vitter might also be lending an ear to clients who can benefit  from the sort of work that might be mandated by NRDA more directly than they would from projects funded by the RESTORE act. The speculation there being that NRDA would call for "more dredging and less science" to put it roundly. Recall that during the 2010 Macondo crisis, Jindal insisted on a scientifically questionable  though, no doubt, lucrative to some, berm and barrier island building program.

Some scientists and federal officials suggest that the remaining money allocated for the berms might be better spent on other coastal restoration projects, a move that BP says it would support. The money could be spent, they say, on barrier island restoration, for example, in which dredged sand is used to bolster existing islands, mimicking natural processes.

But state officials are unswayed. “I don’t see a downside to continuing to do this,” Mr. Graves said. “Maybe we’re being too protective of our coast. O.K., accuse me. I don’t have a problem with that.”

The berm project has been a boon to Louisiana industry: although many of the dredging companies working on the project have out-of-state headquarters, all have a major presence in Louisiana. The Shaw Group, the lead contractor on the project, is based in Baton Rouge and has been one of Mr. Jindal’s leading campaign contributors over the years.

Several of the project’s other contractors are also along the Louisiana coast. CF Bean, an engineering firm, is based in Plaquemines Parish, and one of the four dredging companies involved, Great Lakes Dredge and Dock, has offices there, for example.

Is Jindal's backing of an NRDA heavy settlement an attempt at a second "bermdoggle"? Is Vitter really standing up for Louisiana or is he protecting a more narrow interest? Or is there something else here that I'm missing? I'm seriously asking because the idea that Jindal and Vitter have suddenly decided to favor a federally directed program over one that works basically as a block grant to states seems more far-fetched than any of it.

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