$20.8 Billion – a staggering amount of money. But then again, this is the figure negotiated as the proposed final settlement against BP, for the devastating Gulf Oil Spill of 2010. The disaster is considered to be the worst accidental oil spill in all of U.S. history and the settlement, also the largest. $20.8 billion, then, is an unimaginable figure to pay for an unprecedented disaster. But is it really enough?
The Gulf Oil Spill started with the April, 2010 explosion and sinking of oil rig, Deepwater Horizon, in the Gulf of Mexico. The disaster claimed 11 lives. But with a pipe leaking an estimated 3.19 million barrels of oil until it was successfully capped only 87 days later, the event would ultimately be detrimental to the communities and livelihoods of thousands of other people, with untold long-term environmental effects we are still yet to fully comprehend.
This October, attempts to put a price tag on the damages wreaked by the disaster, the responsibility of the parties involved, and accounting for payments already made, draws closer to an ending. Representatives from the U.S. Department of Justice announced the terms of a proposed $20.8 billion settlement with BP.
It may be recalled that a tentative agreement had previously been reached in July; this month’s development, though, “covers the same money” and is to resolve claims from federal and state parties against BP, including penalties from the Clean Water Act, and claims from over 400 local governments and from the states of Alabama, Florida, Louisiana, Mississippi, and Texas.
Tax Deductible? The $20.8 billion figure is said to cover damages and is also punitive; but observers have noted that most of fine – $15.3 billion – may ultimately be written off as tax deductible because of inexplicit provisions on the tax code that could allow the settlement to be considered a part of business expenses. According to critics, there should be a clearer line between costs incurred from normal business activities and activities that result in public harm. The latter, which should not be treated as an acceptable risk of doing business, should therefore not be allowed to deduct settlement payments from tax duties, and this should be made clear in agreements and settlements.
What will come of this proposed settlement is yet unknown – and even less certain, is if it will truly be enough to cover the immediate and long-term damages from the disaster, and if it would be considered as sufficient punishment that could deter similar incidents in the future.
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Barrett, Devlin. “U.S., BP Finalize $20.8 Billion Deepwater Oil Spill Settlement.” The Wall Street Journal, 05 Oct 2015. Web. 17 Oct 2015. http://www.wsj.com/articles/u-s-says-20-8-billion-bp-spill-settlement-finalized-1444058619
“BP Settlement Could be Deductible.” The Maritime Executive, 08 Oct 2015. Web. 17 Oct 2015. http://www.maritime-executive.com/article/most-of-bp-settlement-could-be-deductible
Santa Maria, Cheryl. “BP to pay nearly $21 billion settlement in oil spill case.” The Weather Network, 10 Oct 2015. Web. 17 Oct 2015. http://www.theweathernetwork.com/us/news/articles/climate-and-environment/bp-to-pay-21-billion-settlement-in-oil-spill-case/58294/
Scully, Donal. “Much of BP’s Deepwater Horizon settlement could be tax deductible.” Splash 24/7, 09 Oct 2015. Web. 17 Oct 2015. http://splash247.com/much-of-bps-deepwater-horizon-settlement-could-be-tax-deductible/
Smithsonian Institution. “Gulf Oil Spill.” Ocean Portal, Smithsonian National Museum of Natural History. Web. Accessed 17 Oct 2015. http://ocean.si.edu/gulf-oil-spill
“US PIRG: Majority of BP’s Deepwater Horizon Settlement Tax-Deductible.” World Maritime News, 09 Oct 2015. Web. 17 Oct 2015. http://worldmaritimenews.com/archives/173626/us-pirg-majority-of-bps-deepwater-horizon-settlement-tax-deductible/
Wood, Robert W. “BP’s $20.8 Billion Gulf Spill Settlement Nets $15.3 Billion Tax Write-Off.” Forbes, 06 Oct 2015. Web. 17 Oct 2015. http://www.forbes.com/sites/robertwood/2015/10/06/bps-20-8-billion-gulf-spill-settlement-nets-15-3-billion-tax-write-off/