GULF SPILL:

Debate rages over what to do with potential billions in Deepwater Horizon fines

Congress remains divided over bipartisan proposals being pushed by Gulf Coast lawmakers to send 80 percent of the potentially billions of dollars in Deepwater Horizon fines to their states to pay for environmental and economic recovery efforts.

After months of intense negotiations, bipartisan coalitions of lawmakers from Gulf of Mexico states came together behind House and Senate bills that would each capture 80 percent of the fines and then subdivide the money between Florida, Alabama, Mississippi, Louisiana and Texas according to complex but similar formulas. Unless the law is changed, the money will flow into the Treasury where it would be used to pay for future oil spill cleanups and to offset deficit spending elsewhere.

What has become clear is that supporters of the bills, each known by its acronym, the "RESTORE Act," have much work still ahead in enlisting necessary support from skittish colleagues.

Some naysayers complain the money would be wasted on unnecessary pet programs or divided among states unfairly. Some call the proposal duplicative, citing the existing damage assessment process under the law and BP PLC's pledges to make individuals and businesses whole through its $20 billion claims fund. Others oppose the favored mechanism for offsetting the $1.2 billion price tag assigned to the Senate version by the Congressional Budget Office: a three-year extension of the per-barrel tax on oil drilling.

"We never thought this would be easy," said Rep. Steve Scalise (R-La.), the sponsor of the House bill who co-founded the Gulf Coast Caucus this summer specifically to unite the region's lawmakers behind the effort. "By no means are we finished. ... We have challenges and we're just going to keep working to get through them."

The Senate bill (S. 1400) passed committee but remains short of the filibuster-proof 60 votes necessary to move through the full chamber.

Disagreement reigns most heavily in the House, where Transportation and Infrastructure Chairman John Mica (R-Fla.) at the start of a hearing yesterday on the proposal, declined to take a position on the legislation (H.R. 3096), though he said bill backers had lobbied for his support.

"I thought what would be best to do, rather than lend my support to a particular measure or division of those awards, was to hear everyone out in an open forum," he said.

Water Resources Subcommittee Chairman Bob Gibbs (R-Ohio) was less equivocal and more leery of Gulf state lawmakers with their hands out. Gibbs laid out a laundry list of concerns: that the responsible companies had already agreed to make restitution, that the Gulf Coast already receives $25 million annually in drilling revenues and that the region has received billions of dollars in flood damage-reduction money following Hurricane Katrina.

"Now some are seeking billions in Deepwater Horizon Clean Water Act penalties for these same activities," Gibbs said. "I have some concerns with the precedent that sets."

Gibbs also argued that the cost was steep and that the money might be more useful in the federal spill cleanup fund, called the Oil Spill Liability Trust Fund.

"Redirecting these penalties away from the fund could undermine efforts to respond to future spills where the responsible party is either insolvent or is operating in foreign waters such as Cuba," he said.

Supporters of the bill bristled at the arguments. Rep. Jeff Miller (R-Fla.), one of five Gulf state members who testified, said he wanted to "set the record straight."

"BP and responsible parties have not, and in many cases do not intend to make many of the individuals that were harmed economically whole," Miller said.

BP PLC created a $20 billion claims fund at President Obama's direction to reimburse individuals and businesses who suffered earnings losses resulting from the damage the spill did to the reputation of Gulf beaches and seafood. But Miller and others said there is no mechanism in the law to help people and criticized the claims fund for having only expended $6 billion and leaving many legitimate claims unfulfilled.

Several business owners testified to the losses they suffered, including Julian MacQueen, CEO of Gulf Breeze, Fla.-based Innisfree Hotels, who said his company survived a dead tourist season by "cutting staff and expenses to the bone."

"Unfortunately, while the rest of the nation enjoyed a record summer, we endured the trauma of a season without tourism," he said.

Equally dismissive of the claims fund and BP's efforts was Scalise.

"They've said a lot of things, and yet you still have not only individuals but small businesses that not only haven't been made whole but some that have gone bankrupt," Scalise said in an interview. He dismissed many of the concerns voiced in the hearing as "inaccuracies or myths that don't really hold merit."

Responding to the criticism, BP spokesman Tom Mueller reiterated the company's pledge in an email: "From the outset, we have committed to paying all legitimate claims and to fulfilling our obligations under [the Oil Pollution Act] to economic and environmental restoration in the Gulf."

Garrett Graves, head of Louisiana Gov. Bobby Jindal's (R) Office of Coastal Activities, testified that the two processes for assessing fines under the Clean Water Act and the existing legal process that puts BP on the hook for environmental restoration -- the so-called Natural Resources Damage Assessment (NRDA) -- were not duplicative but rather "absolutely complementary things."

"They are deterrents from causing environmental damages," he said. "They are in the same statute."

The Obama administration supports efforts to send spill penalties to the Gulf Coast, a recommendation Navy Secretary Ray Mabus, Obama's point man for Gulf recovery and a former Mississippi governor, made in a report last September. But when two administration officials -- Craig Bennett, director of the Coast Guard's National Pollution Funds Center, and Tony Penn, deputy chief of assessment and restoration at the National Oceanic and Atmospheric Administration -- raised concerns during the hearing about short-changing the oil spill cleanup fund and the potential that tapping the fine money could "complicate" future litigation, Rep. Jeff Landry (R-La.) pounced.

"Would you normally go against the recommendation of this administration?" Landry said. "Would you make that recommendation to us today? ... I just like to make sure that everyone's singing off the same hymnal."

Bennett said he would support work to clarify the differences between the penalties and the NRDA process. Penn said BP should be required to pay for damages separately.

"We should not be doing restoration with the RESTORE Act money," he said. "That should be the responsible parties."

Under the bill, the 80 percent of the fines captured would be divided so that 35 percent would be split equally among the states to pay for economic and environmental restoration projects, as defined in the bill. Another 30 percent would be used to develop and implement a comprehensive restoration plan, created by a federal-state Gulf Coast Restoration Council that includes representatives from all five states. Finally, 30 percent would be further disbursed according to an impact-driven formula.

The remaining 5 percent would fund a long-term science and fisheries endowment and create Gulf Coast Centers of Excellence to advance research, science and technology around Gulf Coast issues.

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