Since BP’s Deepwater Horizon oil spill in 2010, conversations of restoration have gone hand-in-hand with conversations about money and specifically how much BP and the other companies involved will contribute to Gulf restoration projects through legal and civil penalties.
The most widely discussed funding source the gulf should see will come from the Resources and Ecosystems Sustainability, Tourist Opportunities and Revived Economies of the Gulf Coast States (RESTORE) Act, which was passed by Congress in 2012.
It deals specifically with civil penalties from Halliburton Energy Service, Transocean Ltd. and BP, but other funds from criminal penalties have already made their way to gulf through settlements with the Department of Justice and the Natural Resource Damage Assessment (NRDA).
Despite all the media coverage, even Eliska Morgan, the Executive Director of the Gulf Coast Recovery Council, is willing to admit the process of how the of recovery money will be divided between each state and how it will be spent can be a little confusing.
The Natural Resource Damage Assessment process, or NRDA, “deals with remedies, resources and human loss of use, which was very easy for Alabama to prove after the oil spill,” Morgan said. “If you wanted to go to Orange Beach in 2010, you couldn’t go. They wouldn’t let you.”
NRDA penalties come into play anytime there is a man-made disaster that harms natural resources, and Morgan said those cases happen everyday. After the oil pill, BP agreed to provide $1 billion to those early restoration efforts through NRDA.
From that money, each state selected $100 million in projects. The majority of Alabama’s portion was diverted by state legislators to go toward the construction of the $85 million Gulf State Lodge and Conference Center, but Morgan said minor projects like oyster restoration, shoreline stabilization and sea turtle lighting are planned as well.
Gulf Environmental Benefit Fund
Gulf Environmental Benefit Funds — acquired solely from criminal penalties — were the next monies to start flowing.
As a part of a settlement with the Department of Justice, BP and Transocean created the GEBF, which the National Fish Wildlife Foundation (NFWF) was charged with administering.
“The total settlement between BP and Transocean was $2.54 billion, but half of that is dedicated to Louisiana’s barrier island and river diversion program,” Morgan said. “The remaining funds were split and Alabama, Florida and Mississippi each received 28 percent.”
Morgan said for Alabama that equates to around $356 million, of which about $71 million has already been received. The remaining payments are scheduled to arrive each February through 2018.
Phase 1 projects from the GEBF were announced last November by NFWF and Alabama had three in the area — a $3.7 million oyster restoration project in Mobile Bay, a $6.7 million restoration project in the D’Olive Watershed and a similar project in the Fowl River Watershed to the tune of $2 million.
“With the NFWF funds, a project simply has to have some kind of nexus to the oil spill, but it doesn’t have to have been directly affected,” Morgan said. “For instance, oysters were harmed in oil spill, so an oyster restoration project in Mobile Bay fits the criteria even though oil never got into Mobile Bay.”
Although there’s public input in these particular projects, she said the National Estuary Program’s Coastal Conservation and Management Plan (CCMP) — which was created with significant public input — is being used to determine which projects are selected.
Morgan said the state has made a concentrated effort not to “blow through” the funds that are already available because some projects may qualify for federal funding through the RESTORE Act.
“Not knowing what’s coming from the civil fines, there’s been a desire on the state’s part to see how some of these other funding sources will play out,” Morgan said. “The governor is not out there trying spend as much money as fast as he can, which I think is impressive considering that it’s an election year.”
Morgan said the second phase of GEBF projects would be announced this November.
Though it hasn’t yet been determined in court, the biggest source of funding is likely be civil penalties distributed to each state through the RESTORE Act.
The act mandates that 20 percent of the money from each settlement will be diverted to an Oil Spill Liability Trust Fund, while the other 80 percent will be divided between NOAA, the five affected states and an 11-member federal council comprised of each state’s governor and representatives from various federal agencies.
That 80 percent goes into Gulf Coast Restoration Trust Fund (GCRTF) and is divided into five “buckets,” with the vast majority going into buckets 1-3.
“Bucket 1” is known as the direct component, which is equates to 35 percent the funds placed into the restoration trust fund. Alabama will see 7 percent of funds.
Each has also come up with different way to determine how to handle the money in Bucket 1. The majority of Gulf States chose an existing agency to manage those, while Florida created a consortium of 23 coastal counties and Alabama created the Gulf Coast Recovery Council comprised of Gov. Robert Bentley, Alabama Port Authority CEO Jimmy Lyons, the mayors of Mobile, Bayou la Batre, Dauphin Island, Orange Beach, Fairhope and representatives of the Baldwin and Mobile county commissions.
The GCRC will also submit projects for the Spill Impact Component “Bucket 3,” — 30 percent of the money from the trust fund— though those projects have stricter guidelines, have to be submitted in a statewide plan and must ultimately be approved by the federal council.
“Bucket 2” will likewise receive 30 percent from trust fund, but it is entirely decided by the federal council and doesn’t guarantee funding to any state. For Alabama, it’s the only competitive aspect of the RESTORE Act.
In October, the U.S. Treasury Department is expected to approve the final regulations that will be used to apply for grant funding through the RESTORE Act.
Lyons, the vice chairman of the GCRC, told Lagniappe that means the biggest priority for the state council is to figure out a mechanism for sifting through the more than 100 projects that have already been submitted.
“There are and will be numerous projects that are quite varied,” Lyons said. “It’s such a gargantuan task and it’s hard to figure out where you start.”
Lyons and the rest of the council will have full disclosure on what projects are submitted, but he said the council has yet establish a way to handle how members will propose projects for consideration.
“Let’s say my organization (the Port Authority) was to submit something — and we will there’s no question, — we haven’t decided how to bring projects up for consideration,” Lyons said.
Lyons said that could also be an issue when projects in the cities represented on the council are presented for a vote, but he said no matter what project is proposed, it will take “at least six votes” to be approved.
In 2012, Transocean settled its civil lawsuit for a total of $800 million, which resulted in the $44 million Alabama has in “Bucket 1” today. Morgan said after the next payment in March, that number will closer to $56 million, at which time the federal council is expected to have around $240 million to work with in “Bucket 2.”
In a 153-page ruling released earlier this month, U.S. District Judge Carl Barbier decided BP bears the majority of responsibility for oil spill citing “gross negligence” and “profit-driven decisions.”
Under the Clean Water Act, that could potentially mean a fine of up to $17.6 billion.
To put that in perspective, Lyons said when the GCRC first began looking at possible settlements, a $10 billion settlement from BP would have netted around $1 billion in funds for Alabama.
Still, the vast majority of money will come when the civil suit against BP is resolved, and Morgan said that resolution could take anywhere from two weeks to 20 years if BP appeals the court’s decision — something she says is likely to happen.
“The settlement is going to take a long time, especially with this gross negligence thing because that really ups the ante,” Lyons said. “The bigger the number, the harder BP is going to fight it.”