GAO warns of federal financial risks from mounting Macondo claims

Damage claims from the 2010 Macondo well incident and crude oil spill and the federal government’s overall government spill response framework pose evolving, uncertain risks to the government and its Oil Spill Response Fund, the US Government Accountability Office said in an Oct. 24 report.

It warned that outlays from the fund could reach the $1 billion per incident limit despite BP PLC, the well’s operator, paying more than $700 million of state and federal cleanup costs as of May 31. Federal and state cleanups are under way, and agencies continue to submit costs for reimbursement, GAO said.

“However, the full extent of these costs, particularly related those related to environmental cleanup, may not be fully realized for some time,” the report noted. More than $626 million had been paid from the fund as of May 31, it noted.

The report said GAO recommended in November 2010 that Congress consider setting a fund per incident cap based on net outlays (expenditures less reimbursement) instead of total expenditures. The congressional government watchdog service also recommended that Congress extend the per barrel tax collected for the fund. The tax is scheduled to expire in 2017, it said.

GAO also found that the US Coast Guard’s processes for paying claims and reimbursements following the accident and spill were appropriate and properly documented. It said that it made four recommendations to establish and maintain appropriate cost reimbursement procedures for the fund. The USCG changed its operating practices to reflect lessons learned responding to Macondo-related claims and updated its reimbursement procedures, but has not yet updated procedures for processing significant claims, the report said.

Contact Nick Snow at nicks@pennwell.com.

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