Environmental Law

Government Claims for Oil Spill-Related Damages


The states bordering the Gulf of Mexico are adding up their oil spill losses and presenting BP with the bill. Alabama was the first state to sue the oil company in federal court for its environmental and economic losses.

BP denied Alabama’s initial claim for $148 million. The state figured it lost that much in taxes on sales, lodging, and fuel because the oil spill kept tourists away this summer.

Florida and Mississippi are also prepared to back up their claims with lawsuits if BP doesn’t come through with payments. Mississippi will seek quarterly or annual payments from BP once the state’s experts come up with hard figures for its lost taxes and environmental damage.

Mississippi’s Attorney General told USA Today he’s in no hurry to sue because it will take time to realize the full extent of the state’s environmental damage. If the state does end up filing a lawsuit, it will be in a Mississippi court under Mississippi law. He wants to avoid litigating the state’s claims in the New Orleans federal court with the other BP lawsuits.

Florida Attorney General Bill McCollum also plans to negotiate his state’s claims with BP before resorting to a lawsuit. An initial claim will seek coverage for wages for state Fish and Wildlife employees who left their regular duties to monitor the coast for oil. A later claim will include revenue lost due to the decrease in fishing and tourism.

Louisiana is also figuring up its oil spill losses. Its figures include lost tax revenue and damage to state property. Louisiana already filed a federal lawsuit against Transocean, the owner of the Deepwater Horizon rig. The lawsuit seeks to determine the degree of Transocean’s liability for the oil spill disaster.

Original Article

Individuals and businesses aren't the only ones who may suffer economic damages as a result of an oil spill, such as the 2010 spill in the Gulf of Mexico. The federal government and state and local governments may lose money or have extra expenses because of the spill.

Just like individuals and business with damages to real and personal property and loss of profits and income connected to an oils spill, governments, too, may file claims to recover these losses and expenses.

Federal, State, and Local Governments

Under the Oil Pollution Act of 1990 (OPA), the federal government, as well as state and local governments, may file claims for "lost government revenue" caused by an oil spill. This when a government or its agencies lose income it would normally receive though things like taxes, royalties, rents, and fees. For example, claims may be filed by:

  • The federal government for lost royalties from oil leases - money paid to the government for oil removed from federal land. It's estimated the US government, and specifically taxpayers like you and me, stand to lose tens of millions of dollars in oil revenues from the 2010 Gulf oil spill
  • A state for lost revenues from sales taxes due to decreased tourism in the state
  • A state or county government over lost property taxes caused by decreased property values
  • A city for lost revenues from parking meters that aren't being used as much, or lost hotel or lodging taxes, because of decreased tourism

State and Local Government Claims

State and local governments may file claims for the costs of increasing or adding to public services during or after clean-up activities connected to an oil spill, such as:

  • Increasing police patrols around an area affected by the spill to keep the public safe, such as a beach or marina
  • Increasing fire personal and emergency medical technicians to respond to spill-related hazards and injuries
  • Adding additional processes or equipment to ensure the safety of drinking water

Claims Process

There's a special claims process under the Oil Pollution Act of 1990 (OPA) for a government's lost revenues and costs of increased public services caused by an oil spill in US "navigable waters" - such as major rivers and coastal waters.

If the spill happened on land or on inland waters, like rivers or lakes, the US Environmental Protection Agency (EPA) is in charge of the spill and claims for damages. If the spill happened in US coastal waters, like the Gulf of Mexico, or deep sea areas under US control, the US Coast Guard is in charge.

Shortly after the 2010 oil spill in the Gulf of Mexico, British Petroleum (BP) created a claims process for damages to personal and real property, business losses, and other damages. In mid-June 2010, BP put $20 billion into an escrow fund and gave up control over deciding what claims to pay and how much to pay. Instead, an Independent Claims Facility handles all claims - but BP's forms and filing process is still used.

Proving a Claim

Governments, like individuals filing a claim under the OPA, have to show they're entitled to damages. For lost revenue claims, governments have to:

  • Show a direct connection between the loss and the oil spoil
  • Give the amount, type, and description of the loss, the name of the agency or office responsible for collecting the revenue, how the revenue normally is assessed, charged, and collected, and the dates for the loss
  • Detail the revenue collected during the two years before the spill

Governments may use, for example, accounting books, ledgers, receipts, documents showing prior royalty payments, to support their claims.

For claims for the costs of increased public services, governments have to show:

  • The increased or additional services were connected to the oil spill and were necessary to protect the public health or safety
  • What specific services were added or increased, when they were added or increased, and for how long
  • The specific services were in fact in addition to the services normally provided
  • The total net costs for the services and how those costs were calculated

To support a claim, a government may use documents such as accounting books, employee time sheets, payroll records, hiring records, employee schedules, and reports from police or fire departments.

For both types of claims, a specific dollar amount has to be provided. Also, claims have to be filed within three years from the date the revenue was lost or increased services were provided.

Questions for Your Attorney

  • What can I do to make sure our local officials file a claim for lost revenues or increased services? Is there any reason why they wouldn't want to file a claim?
  • What happens if a city needs to provide additional public services for more than three years?
  • Should a city or state increase its general liability insurance after an oil spill? Can it file a claim for the extra premiums?
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