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Thursday, November 15, 2012

BP settlement rolling out

NYT doesn't tell us much yet. Except this.

In particular, this settlement does not include what is potentially the largest penalty: fines under the Clean Water Act. The potential fine for the spill under the Clean Water Act is $1,100 to $4,300 per barrel spilled. That means the fine could be as much as $21 billion, according to Peter Hutton of RBC Capital Markets in London. 

The key will be figuring out how much of BP's overall penalty accrues through the Oil Pollution Act vs the Clean Water Act.  This could have big ramifications for coastal restoration funding under the RESTORE Act provision of the transportation bill passed last year.  Please see this long post for details. 

Update: The more details emerge, the clearer it becomes that this still isn't the settlement we're waiting for.

Upperdate:  Turns out, there are a number of things happening today.  One is BP's guilty plea. But also there are indictments against specific individuals.

Robert Kaluza and Donald Vidrine were the two BP "company men" stationed on the rig. The indictment alleges that they were "grossly negligent" in misinterpreting the results of a key test shortly before the well blew out. Kaluza's attorney declined comment until after the Justice Department announces the charges and Vidrine's lawyer has not returned our call.(See indictment)

Kaluza and Vidrine were also charged with a violation of the Clean Water Act.

Separately, a former BP vice president, David Rainey, has been charged with obstruction of Congress and false statements for manipulating estimates of the amount of oil spilled, withholding the company’s truly scientific estimates and causing BP to stand by an estimate that was 12 times smaller than the real amount of oil coming out of BP’s well. (See indictment)
Back during the Summer of Spill, we watched the flow-rate manipulation pretty closely understanding that it would ultimately have a bearing on the legal haggling.  We all pretty well understood BP was lying.  What never became clear was just how closely the feds were working with them to help with that.

Uppestdate: This is what happens when news about a complicated federal prosecution breaks during the day while you're doing other things.  You spend a lot of time figuring things out.

Here is NOLADef with the first report I've seen that addresses how today's fines will be applied.

More than half of the fine money will be redirected to Gulf Coast states for enviornmental restoration. This includes rehabbing and restoring coastal ecosystems, barrier island restoration and river diversion projects off the coast of Louisiana that are part of the coastal master plan. Another $350 million will be used to fund improved oil spill prevention and response efforts in the Gulf.

The Restore Act, which mandates that 80 percent of civil penalties paid to the government for the disaster must be return to Gulf Coast states, does not apply in this case. However, Holder said the Justice Department structured the criminal penalties in a way that was in keeping with Congress' desires for the fines.

"We looked to the restore act as a rough guide to apportion what each state would receive under this criminal investigation," Acting Associate Attorney General Tony West said.

My understanding of the Restore Act is that it applies the 80% rule to fines collected specifically as violations of the Clean Water Act.  Since not all of this money falls under that category, Holder obviously had some discretion to apply the rule as a "rough guide."

Uppesterdate: Sorry this is so sloppy. I'm literally just sharing news here as I read it. This is from Mark Schleifstein's NOLA.com report. 

The agreement calls for $2.394 billion of the settlement money to be paid to the National Fish & Wildlife Foundation and $350 million to be paid to the National Academy of Sciences, both over five years.

The National Fish & Wildlife Foundation often works closely with the U.S. Fish & Wildlife Service on environmental restoration issues involving national parks and refuges, and it is likely that some of that money will be used for restoration projects in Louisiana.

David Uhlmann, the former head of the Justice Department's Environmental Crimes Section and a law professor at the University of Michigan, said BP is likely to pay even more in natural resource damage claims as well as civil penalties under the Clean Water Act.

"The criminal fine is a record amount, but it pales in comparison to the $30-to-$40 billion that BP faced under the Clean Water Act," Uhlmann said in an e-mail Thursday.

Again the upshot of all this is that the majority of the funding Louisiana was hoping would accrue to its coastal restoration efforts from BP is as yet untapped. 

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