On July 14th, oil giant BP announced that they had finally finished their calculations and the final estimate for costs of the 2010 Deepwater Horizon oil spill would likely hit $62 billion. This cost includes all of the settlements and lawsuits from individuals, lawsuits from cities and states, federal lawsuits, and civil penalties and cleanup costs.
According to reports, the “after tax” total is closer to $44 billion, still a massive sum to pay out for any company.
Nearly every article available discussing these payments deals with the business impacts and market value of the company. The Washington Post says that the company has lost 1/3 of their market size as a result of the spill, which was about $180 billion before the disaster.
Lip service is paid to the victims of the spill and the long-lasting effects that the disaster had on the Gulf of Mexico, and one vital fact has been missing completely from the analysis: Taxpayers are the ones who are really getting screwed with this deal.
As I wrote back in April 2016, 75% of the fines and penalties incurred by BP are going to be tax deductible. At least $20 billion of the fines levied by federal and local governments, including Clean Water Act violations, is subject to the 75% tax write off loophole, and it is incredibly likely that BP accountants and lawyers will be able to manipulate the system in such a way that allows the remaining $40 billion to be subject to some form of tax write off.
We know that in 2012, before any of the settlements or lawsuits or fines had even been finalized, BP was able to write off $11.2 billion of their cleanup costs from the 2010 disaster, so that brings the grand total of “out-of-pocket” expenses down to about $29 billion.
At the time, the government and BP were working out a deal so that the settlement funds would be paid out through the Natural Resource Damage Assessment program, which would have allowed the company to write off almost all of their payments for anything related to the oil spill. That deal was finalized in October 2015, paving the way for BP’s massive tax holiday.
So be wary of the headlines. Yes, BP is going to pay billions of dollars for their role in the 2010 Deepwater Horizon disaster that killed 11 people and destroyed the Gulf of Mexico. But U.S. taxpayers will also be forking over billions of dollars to help ease the financial burden on the fossil fuel company, the media just conveniently ignored that part.
Image credit: Vessels spray water on flames caused by flare shooting off the “Discoverer Enterprise” barge set up after the Deepwater Horizon rig exploded. © 2010 Julie Dermansky