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BP to Write Off $15.3B as Tax Deduction in Spill Settlement

Image: BP to Write Off $15.3B as Tax Deduction in Spill Settlement
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By    |   Thursday, 15 Oct 2015 12:06 PM

BP will pay a record $20.8 billion to settle government claims for damages stemming from the deadly 2010 Gulf of Mexico oil spill, but the British energy giant should be able to write off $15.3 billion as an ordinary cost of doing business tax deduction.

"The majority of the settlement is comprised of tax deductible natural resource damages payments, restoration, and reimbursement to government, with just $5.5 billion explicitly labeled a non-tax-deductible Clean Water Act penalty," Claimsjournal.reported.

"This proposed settlement would allow BP to claim $5.35 billion as a tax windfall, significantly decreasing the public value of the agreement, and nearly offsetting the cost of the non-deductible penalty."

An explosion on the Deepwater Horizon rig killed 11 men off the coast of Louisiana and unleashed 134 million gallons of oil into Gulf waters.

It took 87 days to cap BP's runaway well — some 5,000 feet (1,500 meters) below sea level — and the oil slick stretched to the size of the state of Virginia.

Beaches were blackened in five states and the region's tourism and fishing industries were crippled in a tragedy that riveted the nation.

The disaster also led to an overhaul of how the nation regulates the oil and gas industry.

It is the largest settlement with a single entity in the history of the U.S. Justice Department.

 

 

While the region's tourism and fishing industries have rebounded, officials said the environmental damage will take years to repair.

Billions of dollars will be allocated to help restore fragile coastal wetlands and to replenish and protect the fish, birds, sea turtles, dolphins and other marine life harmed by the toxic oil.

"With this settlement, federal, state and local governments and the Gulf Coast communities will have the resources to make significant progress toward restoring ecosystems, economies and businesses of the region," said Commerce Secretary Penny Pritzker.

"We are committed to ensuring the Gulf Coast comes back stronger and more vibrant than before the disaster.

"If made final, the settlement will provide the US and Gulf states with the resources and certainty needed for effective restoration planning and improvements."

The consent decree filed in federal court includes the following payments from BP:

  • $5.5 billion penalty under the Clean Water Act: the largest civil penalty in the history of environmental law.
  • $8.1 billion in natural resources damages, which includes the $1 billion BP already committed to pay for early restoration. BP will also pay up to $700 million if additional damages to natural resources are discovered.
  • $600 million for other claims, including the cost of the natural resource damage assessment and other expenses.

BP also entered into separate agreements to pay $4.9 billion to the five affected states — Texas, Louisiana, Mississippi, Alabama and Florida — and up to a total of $1 billion to hundreds of local governmental bodies to settle claims for economic damages they have suffered as a result of the spill.

The energy giant had initially estimated the cost of the global settlement to be $18.7 billion when the deal was first announced in July.

The additional $2.1 billion cited by the government "does not reflect a new settlement or any new money," BP spokesmen Geoff Morrell said.

Instead, it simply includes funds already spent or disclosed by BP.

"This settlement resolves the largest litigation liabilities remaining from the tragic accident, providing BP certainty with respect to its financial obligations and allowing us to focus on safely delivering the energy the world needs," Morrell said in a statement.

BP's total pre-tax costs for the disaster were $54.6 billion, according to second quarter results reported in July.

The cost to BP of the initial response was more than $14 billion.

BP pleaded guilty in 2013 to 11 counts of felony manslaughter in a $4.5 billion deal to settle criminal charges.

BP had previously established a $20 billion trust fund to cover compensation claims. It has paid out more than $13 billion, much of which went to individuals and businesses.

It has been able to recover some of the costs from its well partners.

(Newsmax wires contributed to this story).

© 2017 Newsmax Finance. All rights reserved.

   
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BP will pay a record $20.8 billion to settle government claims for damages stemming from the deadly 2010 Gulf of Mexico oil spill, but the British energy giant should be able to write off $15.3 billion as an ordinary cost of doing business tax deduction.
Britain, energy, oil, environment, justice
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2015-06-15
Thursday, 15 Oct 2015 12:06 PM
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