Since Alabama Gov. Robert Bentley and Attorney General Luther Strange held a joint news conference July 2 announcing a “historic” settlement with BP for the 2010 Deepwater Horizon oil spill, questions have arisen regarding exactly how much money the state will receive to fund the environmental and economic recovery projects proposed under the RESTORE Act. Answers vary.
Bentley claimed a total settlement of $2.3 billion, which he explained is a combination of Alabama’s portion of federal Clean Water Act fines, plus a $1 billion separate financial settlement of a civil suit filed on behalf of the state.
Though Bentley suggested the remaining $1.3 billion would be steered toward the RESTORE Act, his numbers did not match a breakdown released by Strange the next day. A strict confidentially agreement included in the settlement has kept a majority of the details under wraps and may have contributed to the contradictory interpretations.
According to Strange’s breakdown, the Alabama Gulf Coast Recovery Council (AGCRC), which will administer the state’s RESTORE Act funds with a focus on Mobile and Baldwin counties, will only have $599 million to allocate toward an estimated $1.59 billion worth of projects currently proposed.
Jennifer Ardis, a spokesperson with Bentley’s office, said the discrepancy is due to the governor including funding that has already been provided through the Natural Resource Damage Assessment (NRDA) and a previous settlement with Transocean Ltd., a second party to the spill.
However, Orange Beach Mayor and AGCRC member Tony Kennon expressed concern that there will only be around $300 million available for economic development projects. He, like others on the council and around the state, feel the council was shortchanged by the settlement.
“I’m very disappointed in the amount of recovery money we are getting,” Kennon told Lagniappe. “It is about one-fourth of what we anticipated. We also still don’t really know or understand exactly what the settlement was. We have still not heard specifics from the Governor’s staff about what exactly happened.”
Despite all the speculation, state officials still aren’t able to assign an exact amount to what will move through the RESTORE Act because the U.S. Department of the Treasury has yet to iron out the details of its five separate funding streams. Also, the AGCRC, which held its inaugural meeting in September 2012, has yet to set its own rules and regulations.
“Part of the funds flowing through RESTORE are allocated based upon a formula whose calculation the requisite parties have yet to finally agree upon,” Ardis said.
But with the first payments from BP expected one year after a consent decree is approved, the funds many thought were decades away could be arriving sooner rather than later.
In addition to the settlements with the five Gulf States, local municipalities are apparently settling their own litigation. At press time, the city of Fairhope and Mobile County were both scheduled to accept and announce individual settlements on July 15.
Though gag orders were in place pending official announcements, BP told its shareholders on July 2 it would pay up to $1 billion to resolve claims made by more than 400 local government entities. More details and ongoing coverage is available on lagniappemobile.com.
RESTORE Act funding
Passed by Congress in 2012, the Resources and Ecosystems Sustainability, Tourist Opportunities and Revived Economies of the Gulf Coast States (RESTORE) Act was intended to provide the areas directly affected by the oil spill the ability to determine how civil penalties assessed under the Clean Water Act would be spent.
The law mandates that 80 percent of those penalties be diverted into the Gulf Coast Restoration Trust Fund (GCRTF), which is divided into five funding streams or “buckets.”
BP’s total civil settlement for all affected states was $18.7 billion, which included $5.5 billion in fines under the CWA. Those fines are distributed into the RESTORE Act.
The chart above shows how those funds break down into the five funding streams. Prior to the BP settlement, Transocean Ltd. was fined $1 billion under the CWA, which put $800 million into the trust.
For Alabama, that meant $56 million went into the “direct component” or “Bucket 1.” Based on a previous decision by the local council, those funds will focus exclusively on economic development projects. However, with BP’s settlement, the direct component is scheduled to receive an additional $308 million, giving the AGCRC roughly $364 million to spend on economic development and environmental projects.
The state council will also have oversight of an additional $269 million for environmental restoration in “Bucket 3” — the Spill Impact Component — that is allocated based on a formula determined in RESTORE Act legislation based on factors including “distance from the well” and “miles of oiled shoreline.”
In “Bucket 2,” another $1.32 billion will be allocated by the federal Gulf Coast Ecosystem Restoration Council for projects throughout each of the five Gulf states. States will have to compete for funding in Bucket 2, but each governor has a seat on the council alongside officials from several federal agencies.
Additionally, BP’s settlement allocated around $110 million to the National Oceanic and Atmospheric Administration (NOAA) in “Bucket 4” for long-term monitoring of the recovery efforts and implemented projects.
Finally, “Bucket 5” allocates two and half percent of the trust and one-third of the interest it generates to a “Center for Excellence” that will administer grant funds for research on the Gulf Coast region focusing on science and technology. The Center for Excellence will also monitor Gulf fisheries, deltaic sustainability and restoration, offshore energy development, sustainable economic growth and comprehensive observation and mapping.
As this article is published, the state recovery council has not officially named a Center for Excellence, but Dauphin Island Sea Lab almost certainly will be selected. According to AGCRC Vice Chairman Jimmy Lyons, director of the Alabama State Port Authority, the council originally offered Sea Lab the contract but was reminded by the U.S. Treasury that the process must be competitive.
The June 30 deadline for proposals passed with Sea Lab the only applicant. The proposal is currently being reviewed, but no formal decision has been made by the council.
Speaking to Lagniappe, Lyons said Sea Lab was a “natural choice” as Alabama’s Center for Excellence.
“They do a heck of a job, and have quite an impact in this state on marine science,” he said. “We’re fortunate to have such an organization in this state to … take that two-and-a-half percent and be able to do a lot of good with it.”
So far, 187 projects have been submitted to the state council for funding through the RESTORE Act and NRDA via an online portal administered by the Alabama Department of Conservation of Natural Resources.
The state recovery council, chaired by the Governor and co-chaired by the director of the Alabama State Port Authority, also comprises the chairman of the Baldwin County Commission, the president of the Mobile County Commission and the mayors of Bayou La Batre, Dauphin Island, Fairhope, Gulf Shores, Mobile and Orange Beach. They are charged with weeding through the submitted proposals to select projects meeting the criteria specified for each bucket of funding, but some members are already suggesting the settlement’s limited funding and 15-year payment plan will make the process all the more difficult.
Alabama’s deficit and BP
With a special legislative session that began Monday, July 13, to address the state’s general fund deficit and Gov. Bentley fighting members of his own party for a $500 million tax increase, the settlement’s $1 billion cash infusion over the next two decades was a welcome development for some state lawmakers. However, other officials were disappointed to see the state’s individual lawsuit against BP settled in tandem with penalties under the Clean Water Act and NRDA.
U.S. Rep. Bradley Byrne of Fairhope is among those criticizing the settlement for “taking money from a coastal disaster” to fix a “manmade disaster” in Montgomery.
“My concerns have not eased, and if anything, they’ve gotten worse,” Byrne told Lagniappe. “The settlement was not as large as we were told, and $1 billion goes directly to state government where the legislature in Montgomery will spend it as they see fit. They’ve directed $1 billion away from the coast to help deal with funding problems at the state level which have nothing to do with the oil spill.”
Byrne also took issue with the confidentiality provision agreed to by Bentley and Strange, suggesting it was contrary to typical practices of the U.S. Department of Justice.
Based on its own policy, the Justice Department says that “in any civil matter in which the Department is representing the interests of the United States or its agencies, it will not enter into final settlement agreements or consent decrees that are subject to confidentiality provisions, nor will it seek or concur in the sealing of such documents.”
However, “there may be rare circumstances that warrant an exception to this general rule.”
“The Justice Department, the Attorney General’s office, the Governor’s office — these are public entities, and there’s no reason at all why they should agree to confidentiality,” Byrne said. “This is something they willingly agreed to; it was not forced by a court. This was a multi-party settlement and anybody in that group could have walked away at any time.”
During his announcement of the settlement, Bentley emphasized the annual payments from the state’s settlement would account for just 12.5 percent of the current budget deficit. However, both chairmen of the state’s budget committee have already discussed plans to introduce legislation to allocate at least the first part of the BP settlement toward the budget deficit.
The $1 billion Bentley secured will be distributed into the state’s general fund incrementally over the next 18 years, but there is already talk of using it to reimburse the $582 million lawmakers have siphoned from the Alabama Trust Fund since 2010 to balance the budget.
Though a timeline hasn’t been released, Bentley has said more recently that Alabama would receive $200 million in the first three years after a consent decree is approved. BP has also released statements to its investors reflecting those claims. Meanwhile, there is no way to compare the settlement to the state’s actual losses in tourism and tax revenue following the oil spill because the state doesn’t want BP to have that information until the settlement is finalized.
“We cannot disclose what we would have presented as evidence [at trial],” Ardis said. “To do so would put us at a severe disadvantage should the settlement not be finalized and should we have to try our case against BP.”
With a projected $600 million to work with, the AGCRC will have to make some tough choices regarding environmental restoration and economic development, while also finding an equitable balance for projects benefitting both Mobile and Baldwin counties.
Last October, a total of 94 projects proposed had a cumulative cost of $611 million, an amount already exceeding what the state council will ever see from BP’s settlement. Today, there are more than $1.59 billion in cumulative project proposals, meaning the state council can fund about 40 percent of them.
While projects can be proposed by any individual or organization, almost every representative on the state council has submitted proposals of their own. Because the council has yet to finalize its own rules and regulations, there is no policy regulating potential conflicts of interest.
Though the AGCRC is essentially a steward of public funds, it is not subject to same rules as other public governing bodies — including open meetings laws. In fact, the council called a closed meeting on Wednesday, July 15. At a previous closed meeting in December 2014, the council agreed to utilize $56 million from a settlement with Transocean exclusively for unspecified economic development projects.
Already some environmentalists have expressed concerns about how BP settlement funds will be allocated once the AGCRC begins to select projects. The political makeup of the council is one of several reasons Mobile Baykeeper, an environmental nonprofit, lobbied for a “citizens’ advisory committee” to work alongside the council.
According to Executive Director Casi Callaway, several groups supported the idea of a citizens’ advisory committee, but ultimately the council voted against it. According to a list of frequently asked questions on the AGCRC website, a citizens’ committee “could potentially prevent and/or artificially limit the range of individuals or groups from the community who can provide input.” But the council ensures “there will be multiple steps throughout the process where the public will have an opportunity to participate and provide comments.”
When asked if she had confidence in the council to select meaningful environmental projects over a wishlist of unfunded economic development, Callaway said she has confidence in her organization.
“What I have confidence in, is that I’m going to work every minute of every day to make sure they do it right,” Callaway said. “If you think you’re going to spend this money hurting the environment, you’ll be dealing with me and all of the people in this town that get it — the environment is our economy.”
Eric Mann contributed to this report.