Deepwater Horizon rig on fire the day after the rig blew out, April 21, 2010. Image: U.S. Coast Guard.

Is a bird in the hand worth two in the bush? Apparently government and industry lawyers both think so.

Beach goers react to oiling of northern Florida beaches in the summer of 2010. Image: Tampa Bay Times.

I’m eating some squid nigiri and a baked crawfish California roll at my favorite sushi spot in Thousand Oaks to celebrate the end to this five-year escapade and pen this here blog entry. But enough about Tomodachi…back to the lawsuit.

This morning the final settlement for environmental impact-related lawsuits related to the 2010 Deepwater Horizon Blowout (aka the Gulf Oil Spill,  aka the BP Oil Spill) was announced. British Petroleum agreed to pay $18.7 billion to settle a range of federal, state and local governmental claims stemming from their failed April 2010 effort to cement in/cap the successful exploratory well drilled 1,500 m below the surface of the ocean and 75 km (47 mi) off the Louisiana coastline. The ensuing three month-long “spill” (it was technically a blowout, but everyone calls it a spill and so I will adopt that de facto lingo from here on out) was the largest marine oil spill in U.S. history and second largest overall oil spill in U.S. history (the largest being the Lakeview Gusher that blewout on land 100 years prior to the Deepwater Horizon in southcentral California; go check out the admission-free Western Kern Oil Museum to learn more, only about 90 minutes from Camarillo).

As with so many things these days, I am of two minds when it comes to this settlement. The reality is that it will not make us whole relative to the impacts incurred from the 2010 spill. But I also know that our legal system is not up to the task of making us whole.  The entire premise of an adversarial arena to settle technical questions is, quite frankly, a joke.  But human nature being what it is, this is the system we are stuck with and the convention we have at hand. Given the litigious context in which we live, this was probably the best we could hope for as far as rapidly recovering funds to repair the environmental damage incurred across the northern Gulf of Mexico.

Louisiana Attorney General Buddy Caldwell announced Thursday morning that BP has reached an agreement with U.S. authorities on an $18.7 billion settlement in the 2010 Deepwater Horizon disaster in the Gulf of Mexico. Photo: Mark Ballard, Louisiana Advocate.

Properly interpreting the BP settlement

Step 1: The Reality

Lets begin with a clear statement of impact: The Louisiana coastal, offshore, and deep benthic regions bore the brunt of the ecological impacts from the Deepwater Horizon spill.

Step 2: Everyone Wants a Piece

As soon as oil starts erupting from the containment vessel or pipe, people start sticking their hands out. In the case of the Deepwater Horizon, every Gulf State ran to the front of the line with both hands out saying “What about me?” Leave out the fact that most of these governments have actively sought to limit regulatory oversight of the oil and gas industry and to properly mitigate for the impacts stemming from their own anti-wetland/anti-coastline policies (completely separate from oil or gas). Since the first week of May 2010, everything from the federal RESTOR act to the GOMRI has emphasized that money needs to flow to all of these Gulf States before anyone/anywhere else. So Texas and Florida get their slice even though any impacts to those areas from Deepwater Horizon oil were minimal at best. That translates into less for Louisiana’s environment.

Another large chunk of funds from this settlement will go to compensate for knock-on economic impacts of the spill such as shuttered oyster houses, hoteliers who experienced cancelled reservations, etc. That also translates into less for Louisiana’s environment.

Add to the all this the fact that the northern Gulf of Mexico was the most poorly studied and monitored region of the United States prior to the 2010 disaster. This was the only region of the United States without a Long-Term Ecological Research site (funded by the NSF), the location with the poorest array of littoral monitoring sites (ala our MARINe network here in California), etc. This all has made our estimating of the true magnitude of impacts from the spill difficult; if you fell off of edge of fog-shrouded cliff, you are hard pressed to know if you are perched 10 or 100 or 1,000 feet from the safety of the cliff-top trail.

Step 3: The Settlement By the Numbers:

Overall BP Payout: $18.7 billion

• $7.1 billion (over 15 years) for mitigating impacts documented by the Natural Resources Damage Assessment (NRDA; a federal effort governed by the Oil Pollution Act of 1990). Note that BP will claim they are spending $8.1 billion. In reality they will only be expending $7.1 from here forward as they are to be given credit for the nearly $1 billion they have spent to date on NRDA-related recovery projects prior to July 2010.
• $5.5 billion (over 15 years) for civil penalties dictated by the Clean Water Act. Note that much of this is a formulaic, dictated by how much oil (I think they have ignored the gas emissions) was released. This was also the reason BP was so strenuously challenging the world’s best estimate of the real amount of oil that was released from the wellhead (from the Joint Flow Rate Technical Group), ultimately getting Judge Barbier estimate of oil released lowered from the actual value of 4.19 million barrels to 3.19 million barrels.
• $4.9 billion (over 18 years) for economic claims.
• $232 million will be slated to cover any further damages not documented as of this morning. From their accounting tables, it looks like this will be held in reserve until the 18^th year unless there is a credible argument put forth to access this sooner.
• <$1 billion to resolve claims from more than 400 local governments.

Texas: $388 million

• $238 million for NRDA (no Clean Water Act violation penalties were articulated).
• $150 million for economic damages.

Louisiana: $6.8 billion

• $5 billion for NRDA.
• $787 million in Clean Water Act penalties.
• $1 billion for economic impacts

This settlement will bring Louisiana’s total funding from BP for the Deepwater Horizon disaster to around $10 billion, more than any of the other Gulf state.  Reacting to the settlement announcement, Louisiana Governor Bobby Jindal noted “these funds will allow us to build on the momentum gained through the state’s increased investment in coastal protection and restoration since 2008.”  And if you believe Louisiana has seriously invested large sums in coastal restoration since 2008 or that Governor Jindal’s administration is even vaguely interested or capable of effectively launching such an investment, then I have a bridge to sell you…

Mississippi: $1.5 billion

• $183 million for NRDA
• $582 million for Clean Water Act penalties.
• $750 million for economic damage

Alabama: $1.3 billion

• $296 million for NRDA (no Clean Water Act violation penalties were articulated).
• $1 billion for economic damages

Florida: $3.25 billion

• $1.25 billion for NRDA and Clean Water Act violations (no press release has adequately distinguished these two categories sufficiently for me break these down further).
• $2 billion for its economic loss claims.

Environmental protection for Governor of Florida Rick Scott has historically been a very low priority.  His historic actions imply his interest in the environment is limited.  As long as something looks aesthetically pleasing, that appears to be good for this public servant.  He was happy to note that this money will help “keep our state beautiful.” Good luck with that one.

BP: Mostly Upsides

This year has mostly been about upsides for BP.  In addition to their successfully getting the estimate of oil released lowered, the company will be paying $7 billion less than it originally estimated it might have to pay for ecological impacts.  In addition, all of the NRDA-related payments are classified as compensatory (unlike the Clean Water Act payments) and so will be tax deductible.  Can anyone say “flat tax?”  Also keep in mind that all of these payments will take place over 15 or 18 years.

In case you were wondering, BP reported gross profits (not gross revenue) of $4.13 billion in for the first three months of 2015 alone.  For post blowout period (2011-2014), BP has reported gross profits of $199.85 billion.  The settlement is 9.4% of that amount.  Lots of money to be sure, but a minor bump all things considered. Investors agree with BP shares closing today up 4.7%.

Step 4: Putting that money to work

Given the paucity of pre-2010 data across the region and sheer technical difficulties of restoring pelagic or abyssal communities, most of this NRDA and Clean Water Act funds will be directed to coastal areas where we have much more experience and a more or less proven track record of recovering ecological functioning.  Most states have articulated their desire to spend these monies on restoring coastal bottomland hardwood forests, marsh, oyster beds, sea grass beds, etc.  And so now the political gamesmanship will kick into high gear.  Everyone and their brother will be arguing that their project really needs this money.  And given the fact that not all restoration projects cost the same (below see a classic example for the varying costs for restoring different types of wetlands, which I have adjusted to 2015 dollars), coastal resource managers will find themselves very popular over the coming months and years.  Don’t worry about political interference from state capitols. That never, ever, ever happens in Louisiana.

Healing the Louisiana delta

Louisiana is unfortunately the home to greatest magnitude of wetland loss in the lower 48 states.  Setting the politics, selection criteria, and such aside, several folks asked me today if this amount of money will be “enough” to help improve the condition of our degrading Louisiana coastline.  As a classic academic, my answer is of course “no, it is never enough.”  In this case, I might actually be right.  These monies will be a huge shot in the arm for Louisiana coastal restoration (roughly $500 million a year for 15 years), but a far cry from what we need to get the Mississippi Delta into an even vaguely sustainable state.

So, how much would we need spend?

In 2012, the State of Louisiana put forth their Coastal Master Plan.  This plan called for $50 billion dollars to be spent over 50 years on a wide array of projects.  In classic Louisiana style the state has actively chosen to not fund this fully themselves (going so far as to pass legislation declaring illegal efforts to hold wetland destroyers to account).  Political leaders to date have relied instead on petitions to the federal government and this much hoped for BP settlement to underwrite their effort.

We can also contrast the scale of this BP funding to a quick glance at our demonstration large-scale coastal and wetland restoration efforts to date in Louisiana.  These example projects below are funded by the Coastal Wetlands Planning, Protection and Restoration Act, (CWPPRA pronounced quip-rah), a program launched in 1990 to identify, prepare, and fund construction of large-scale coastal wetlands restoration projects.  These projects are mostly experiments designed to prove a restoration concept or test a methodology.

CWPPRA Project List

These projects in total cost just over $2 billion.  This BP-provided funding will help out, but this alone will not solve the problem; rolling out these efforts for “real” will take at least an order of magnitude more funding.

Relevance for the Refugio Oil Spill

I hope the relevant authorities dealing with our current Refugio Spill will avoid the litigious track and be able to work out a reasonable settlement quickly and out of court.  Dragging out these adversarial conflicts for months and years and decades helps no one and no ecosystem.