#TaxDay Blog: Our Tax Money Underwrites BP’s Gulf Negligence

Chris Carnevale | April 15, 2016 | Energy Policy, Offshore Drilling

It’s April 15–tax day (at least for most years). Some of us get returns, some of us get surprised with extra taxes that are due, but no matter if you owe the IRS money or are owed money by the IRS, we are all getting fleeced to subsidize BP’s criminal behavior through our taxes.

It was six years ago this week, that BP’s Deepwater Horizon offshore drilling rig burst into flames, killing eleven workers and setting into motion the worst environmental disaster in United States history. Over the next 87 days, 200 million gallons of oil dumped into the Gulf of Mexico, oiling over a thousand of miles of coastline from Texas to Florida, sickening residents and exposing 50,000 cleanup workers to hazardous chemicals on a daily basis, and severely harming or killing countless birds, fish, and marine mammals.

These impacts came at a great cost to the residents of the Gulf Coast over multiple years and are still unfolding today. BP estimates that it will end up paying over $50 billion in damages and cleanup costs. A large part of these costs is the recent settlement of state and federal claims, totaling $20.8 billion, through the U.S. Department of Justice lawsuit against BP.

This is the largest environmental settlement ever reached in United States history. Yet it turns out that American taxpayers will be footing a large part of the bill, as $15.3 billion will be tax-deductible as “business expenses.” With BP’s tax rate, this leaves taxpayers on the hook for paying perhaps $5 billion of BP’s criminal activity.

The Wall Street Journal explains: “Under federal law, companies aren’t allowed to deduct fines or penalties they pay as part of a settlement. But only $5.5 billion of the total cost of the settlement is a fine. The remainder, including the billions of dollars BP will pay to the U.S. and five Gulf states to cover environmental damage, can be classified as ‘ordinary business expenses,’ which are deductible.

Oily Beach: Taken after the Deep Water Horizon spill in coastal Alabama. Photo credit: SACE

This tax code loophole is a major disappointment to taxpayers nationwide, not to mention how insulting it may be to Gulf Coast residents, as each of the billions of dollars in tax write-offs for BP’s gross negligence is one more dollar taxpayers have to fund.

Congressman Raul Grijalva of Arizona, the ranking Democrat on the House Natural Resources Committee, explained in a letter co-signed by 52 other members of Congress that, “The ‘gross negligence’ that led to perhaps the worst environmental disaster in U.S. history should not be an opportunity to game the tax code. Challenging fiscal choices may lie ahead, and every dollar we lose in revenue is a dollar cut from much needed programs, raised from another source or added to the national debt.”

Because BP’s tax records are not made public, we can’t know exactly what deductions they take, but Phineas Baxandall, senior analyst for tax and budget policy for the U.S. Public Interest Research Group (PIRG) estimates that BP has already pushed $10 billion of oil spill costs on U.S. taxpayers through write-offs on clean up and restitution funds.

To help shine a light on this outrageous tax loophole, the U.S. Senate passed a bill called the Truth In Settlements Act, which would require federal agencies to publicly disclose the terms of large settlement agreements,  including whether or not the settlements could be tax deductible, and would require businesses to disclose in their SEC filings whether or not they use the tax deductions from their settlements. The bill is awaiting action in the House of Representatives.

On this Tax Day, we stand in solidarity with the Gulf Coast communities still feeling the health, environmental and economic impacts from this horrible disaster. SACE is committed to tracking the offshore drilling issue throughout the Southeast, and we will continue to call out this dangerous and manipulative industry. SACE recently launched this petition to affirm President Obama’s decision to cancel plans for Atlantic offshore drilling–please add your name to help ensure the Atlantic coast is never opened to offshore drilling, while we help push for justice in the Gulf.

Chris Carnevale
Chris is SACE’s Climate Advocacy Director. Chris joined the SACE staff in 2011 to help with building public understanding and engagement around clean energy solutions to the climate crisis. Chris…
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