RESTORE Act for Gulf Coast is now law as Louisiana and others wait for the money

Pelican chicks nest on a tiny island in Barataria Bay, which was heavily oiled in 2010, June 28, 2012
Pelican chicks nest on a tiny island in Barataria Bay, which was heavily oiled in 2010, June 28, 2012

President Obama's signature on the huge transportation bill clears up one of the great mysteries surrounding the 2010 Gulf oil spill: how the government would decide to handle billions of dollars in fines it will reap from BP PLC and BP contractors.

Tucked safely inside the highway bill is a carbon copy of the RESTORE Act, the bipartisan effort to steer 80 percent of the fines to Louisiana and four other Gulf coast states.

Any trial involving the spill would include competing views of how much oil actually spilled. However, based on government estimates of 4.9 million barrels, civil fines under the Clear Water Act could start at $5.4 billion. BP could see that total rise to $21 billion if a judge were to find the company was negligent.

Legal experts have pointed out that huge disparity — nearly $16 billion between the lower estimate and the one in the stratosphere — gives the two sides plenty of incentive to reach a settlement.

Otherwise, the theory goes, the government or the oil folks will be risking an adverse ruling that could cost billions.

Last week, the Wall St. Journal quoted sources as saying settlement discussions have picked up between the Justice Department, BP and the rig owner, Transocean.  Reports suggest BP has been pressing for a total fine of $15 billion, a significant discount from the $25 billion the government was said to favor.

So far, BP estimates it has spent $22 billion on cleanup costs and payments to spill victims. The company has reached a civil settlement with victims that could total another $7.8 billion.

The company has already taken a $37.2 billion charge for what it estimated to be the maximum costs related to the spill.

The stakes for Louisiana, Mississippi, Alabama, Florida and Texas are huge.

What the RESTORE Act Does

Under the old law, BP and other companies found responsible for 2010 spill would have paid potentially the same penalties for each barrel of oil spilled.

However, the money would have flowed into the government's general fund.

Instead, 60 percent of the penalties under the RESTORE act will be allocated to a new body called the Gulf Coast Ecosystem Restoration Council.

Half of those funds (30 percent of the total) would be used to implement a comprehensive federal environmental plan.

The other half (30 percent) will be distributed to Louisiana, Texas, Mississippi, Alabama and Florida and spent according to each state's individual plans.

Another 35 percent of the penalties will be available to Gulf Coast states for environmental and economic restoration.

The remaining 5 percent will be dedicated to science and monitoring of the Gulf Coast ecosystem restoration and fisheries.

After previous large spills — both the 1979 Ixtoc blowout in the southern Gulf and the 1989 Exxon Valdez tanker crash in Alaska — scientists bemoaned the lack of scientific study.

In Alaska, for example, the critical herring fishery was virtually lost a couple years after the Exxon disaster. Since there was limited regular monitoring of the spill's effects on Prince William Sound, there was no way to determine scientifically the role the Valdez may or may not have played in the fishery's collapse.

50 percent of the accrued interest on the Gulf Coast Restoration Trust fund will fund science and monitoring programs.

Since much of the money is theoretically aimed at repairing environmental impacts of the spill, Louisiana would seem poised to cash in under the act.

However, some environmental groups have already raised concerns about the potential for local and state politicians along the Gulf Coast to steer money away from restoration efforts to "economic development" projects.

The Gulf Restoration Network, a vocal supporter of the legislation, called its passage a "satisfying and important step forward."

However, the group noted the Gulf Coast Ecosystem Restoration Council will need to "work collaboratively towards a sustainable Gulf and not fall prey to the pork-barrel politics of the past."

The governors of the five Gulf coast states will each have a seat on the council.