BP is Liable for Royalty Payments in Deepwater Horizon Spill

The recent New York Times OpEd by Ian R. MacDonald, John Amos, Timothy Crone, and Steve Wereley on the need for an accurate measurement of the oil spilling into the Gulf misses an important point: it won't only help the effectiveness of the response for this and other potential future disasters, but it is also essential for determining BP's liability for royalties owed for this oil.

Much of BP and the federal government's response to the Deepwater Horizon disaster is dictated by the Oil Pollution Act of 1990, which was passed after the 1989 Exxon Valdez spill. The Congressional Research Service's Jonathan L. Ramseur has a report with more background, but looking to the statute itself provides more evidence that BP is liable for the royalties on the oil spilling in the Gulf:

Notwithstanding any other provision or rule of law, and subject to the provisions of this Act, each responsible party for a vessel or a facility from which oil is discharged, or which poses the substantial threat of a discharge of oil, into or upon the navigable waters or adjoining shorelines or the exclusive economic zone is liable for the removal costs and damages specified in subsection (b) of this section that result from such incident...

Turning to subsection (b), under "(2) Damages" we find:

(D) Revenues

Damages equal to the net loss of taxes, royalties, rents, fees, or net profit shares due to the injury, destruction, or loss of real property, personal property, or natural resources, which shall be recoverable by the Government of the United States, a State, or a political subdivision thereof. (Emphasis POGO's)

As the House Natural Resources Committee kicks off its seven-part oversight hearing series on the Deepwater Horizon Oil Rig Explosion on Wednesday, we hope the Committee will ask Minerals Management Service (MMS) Director Liz Birnbaum how MMS plans to ensure accurate measurement of the damage and calculate royalties owed accordingly.

Find our approximation of what this number might look like below the jump.

To update our very approximate calculation of royalties owed for the oil leaked, taxpayers are owed roughly $35 million dollars in royalties. Here's my calculation: 95,000 barrels a day * 32 days (started on April 22) * $70 / barrel * .167 royalty rate = $35,537,600.

To put this number in perspective, if the royalties owed are part of the $75 million liability cap, the royalties lost are already approaching half of that amount. BP has said it is prepared to pay more than the amount specified in this cap.

-- Mandy Smithberger

Comments

[Joe Burke]

Not to be a cynic, but could it be that it BP's understatement of the amount of crude polluting the Gulf from this disaster is more to cover its corporate rear-end for underreporting the amount of oil that it was pumping prior to the spill rather than its liability for clean-up?