BP, Gulf of Mexico, oil spill
The 2010 Deepwater Horizon explosion and blowout set into motion what was easily the biggest waterborne oil spill in history. It also led to what has likely been the most expensive cleanup and natural resource restoration effort ever seen.
Over the last decade, BP and its drilling partners have put at least $71 billion into mitigating the disaster’s effects.
The fire hose of money started almost immediately after the incident, when BP dedicated $20 billion to cover clean-up costs, pay for independent research into the cause and effects of the spill, and to begin to compensate the tens of thousands of people and businesses affected, physically and financially.
BP’s costs grew as the economic and environmental impacts of the oil spill became more clear, and as thousands of individual and business lawsuits clogged federal courts.
“The Deepwater Horizon accident forever changed BP,” the company said in a statement emailed to The Times-Picayune and The Advocate. “We will never forget the 11 people who lost their lives, nor the damage caused.”
It also likely changed the way future major economic and environmental disasters will be treated, observers say.
“The Gulf oil spill ushered in the era of multi-billion-dollar criminal and civil settlements for environmental disasters,” said David Uhlmann, a law professor at the University of Michigan and the former chief of the U.S. Justice Department’s environmental crimes division. “Those settlements directed billions of dollars to the Gulf coast states to address the environmental and economic consequences of the spill.”
Environmental advocates remain concerned, meanwhile, that even the huge amount of money BP has disgorged will not be enough to repair all of the long-term damage.
“For many wildlife in the Gulf, the decade-old Deepwater Horizon oil spill is not over," said David Muth, director of the National Wildlife Federation’s Gulf of Mexico Restoration Program. "We will probably never understand the full extent of the damage, but we do know that we have an obligation to restore the Gulf of Mexico and to ensure that a disaster on this scale never happens again.”
The vast majority of the tab – about $69 billion – has been picked up by BP. The remainder has been split among Transocean, which owned the Deepwater Horizon, and BP’s drilling partners Anadarko and MOEX.
BP’s tally could still rise. A number of large business claims are still pending in federal court. The company’s settlement with individuals who filed medical claims immediately after the accident requires BP to pick up costs well into the future. And more recent lawsuits filed by hundreds of individuals with late-occurring health effects are still pending.
A variety of organizations have a say in how all that money – a little more than twice the state of Louisiana’s annual budget -- is spent. The group includes BP itself; federal judges; federal, state and local governments, and an environmental organization that got a share of criminal settlement money.
RESTORING THE ENVIRONMENT
One big chunk of the money, around $17 billion, was dedicated to natural resource improvements along the Gulf Coast, with nearly $8 billion going to projects in Louisiana.
That work started early, when BP provided the state with $360 million for sand berms along barrier islands, which aimed to capture spilled oil before it polluted marshes. After the oil stopped flowing, BP agreed to allow the remainder of the money to be used to help rebuild those same islands.
Louisiana’s battered coastline also got a boost from settlements of criminal claims against BP and Transocean, which steered $2.5 billion to the National Fish & Wildlife Foundation to be used on natural resource improvements. That included $1.3 billion for Louisiana’s barrier islands and for land-building Mississippi River diversions.
The criminal settlements also directed $500 million to the National Academy of Sciences for a 30-year research program on Gulf resources and the oil and gas industry. That was in addition to $500 million BP put up shortly after the disaster to pay for 10 years of spill research through a new think tank.
A separate settlement of civil claims against BP and its partners created two large pots of money, totaling $14.1 billion, that federal, state and local governments could tap to restore natural resources. The money will be paid in installments through 2031.
Louisiana is guaranteed $5 billion of the $8.8 billion Natural Resource Damage Assessment settlement, while $1.2 billion was dedicated to open ocean restoration programs. Alabama, Florida, Mississippi and Texas received smaller shares.
So far, about $1.4 billion of the $8.8 billion has been been steered to 200 projects along the Gulf Coast, the majority in Louisiana. And another $500 million is on track to be committed to Louisiana projects during the next 18 months.
A separate tranche of money, which will total $5.3 billion over 15 years, will finance natural resource restoration and compensation projects. Called the RESTORE Fund after the law that created it, it is divided into five “pots,” which each of the five Gulf states getting a share pursuant to a complex formula.
Among other things, the RESTORE Act dedicated $133.3 million to a Gulf science research program and to five state research grant programs. The Baton Rouge-based Water Institute of the Gulf was named as the state’s center, and is dedicating 75 percent of its money to research supporting the state’s coastal Master Plan.
MAKING GOVERNMENT WHOLE
BP also agreed to pay $4.9 billion to the five states over 18 years for economic and other non-natural resource losses, and another $1 billion for claims of more than 400 local government entities.
For instance, the Jefferson Parish School Board reported in 2015 that it received a $32.7 million economic settlement; the Jefferson Parish Sheriff’s Office received $6.4 million; and the Audubon Commission received $3.5 million.
Outside of the settlements, BP also provided $30 million to Louisiana to pay for seafood and tourism marketing during and after the spill, and reimbursed local governments for their assistance with cleanup operations, including about $1.6 million to the Grand isle Volunteer Fire Department between 2010 and 2014 for fire watch services during oil removal operations, and for a summer juvenile worker program.
ECONOMIC, MEDICAL CLAIMS
Soon after the accident, BP set up a clearinghouse, called the Gulf Coast Claims Facility and run by New York attorney Kenneth Feinberg, that paid out $6.7 billion for individual and business claims filed directly with the company.
The facility was dismantled in March 2012, when BP agreed to settle more than 100,000 still-pending individual and business claims filed in courts across the country that were consolidated into one class-action case overseen by U.S. District Judge Carl Barbier Jr.
"BP had such a weak case for defense, primarily based on shifting the blame to other companies, that prompted it to be cooperative with the plaintiff class," said Edward Sherman, a Tulane law professor. "BP was also concerned with preserving its image by not drawing out the litigation for a long period."
Barbier appointed separate economic and medical claims supervisors to handle an avalanche of claims.
The economic claims program has paid out $12.2 billion, two-thirds of it to businesses. Louisiana companies submitted about a third of the total claims, though BP has not provided a state-by-state breakout of how the money was paid.
The program included a seafood compensation program that has paid $2.2 billion to 5,382 claimants so far. A separate program for people who harvest seafood and game for their own use paid $529 million to 46,614 claimants.
Under another program, cleanup workers and residents of areas closest to the Gulf could file claims for medical costs related to specific conditions included in the class-action settlement. They were also given access to a “periodic medical consultation program,” which is ongoing.
Claims had to be filed by Feb. 12, 2015, unless you developed what the settlement called a “later-manifested physical condition” that resulted from exposure to the spilled oil or dispersants. The medical claims program had paid out $65 million to 22,588 individuals as of last year.
The claims program also conducted initial screenings of the later-developing medical cases, which were then supposed to be presented to an arbitrator. But BP and the attorneys could never agree on the arbitration system, which resulted in more than 4,000 individuals filing new lawsuits, most of which are still outstanding.
The medical claims program also provided $104.7 million to fund eight regional healthcare outreach programs in Gulf states, with the last money distributed in May 2016.
"The BP payouts provide a ready compensatory template for future similar incidents and will likely be referenced as a starting point for negotiations" in a future spill, said Blaine LeCesne, a professor at Loyola Law School.
LeCesne, however, also feels the initial rules for paying claims allowed some businesses to attempt to recover losses he considers dubious. He said BP successfully challenged some of those rules, often winning the ear of appeals judges and saving billions of dollars.
On the other hand, LeCesne said medical claims rules "were arguably under-inclusive," with a short time frame and strict rules for connecting exposure to illness.
BP also reports that it spent more than $14 billion directly on response and cleanup activities. According to the company, at its peak in 2010, the response included the mobilization of 48,000 people, 6,500 vessels and the deployment of about 2,500 miles of boom material to collect oil, representing more than 70 million personnel hours.