The Magazine

The Oil Spill Windfall

A test for Republicans.

Dec 9, 2013, Vol. 19, No. 13 • By DANIEL M. ROTHSCHILD
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A federal court in Louisiana will decide in the next few months how much oil company BP must pay in Clean Water Act penalties as a result of the 2010 Deepwater Horizon oil spill. The fine could total as much as $18 billion and, whatever the court determines, will rank among the largest in American history. How it gets spent will serve as a key test of the ability of conservative governors and legislatures to manage wisely the unfettered resources for which they so frequently pine.

Can the payout at least go well?

Can the payout at least go well?

infrogmation of new orleans

Under the terms of the RESTORE Act, which Congress passed in 2012 with strong bipartisan support, 80 percent of civil and administrative fines from the Deepwater Horizon spill go to a trust fund for environmental and economic restoration in the states of Louisiana, Mississippi, Alabama, Florida, and Texas. Of this, 65 percent goes directly to state and local governments for use in resource restoration, economic development, infrastructure building, and increasing resiliency against future disasters. All five states, of course, have GOP governors and Republican majorities in their legislatures.

Depending on how state officials spend this money, the RESTORE Act could go down as a paradigm of effective oversight or as the conservative analog of the stimulus. Either way, conservatives will be in the driver’s seat. The only way to ensure that states allocate the funds properly is to make the spending process radically transparent and targeted towards genuine public goods.

Because the money comes from a civil judgment, not taxpayers’ pockets, conservatives and taxpayer watchdogs may think that the RESTORE funds aren’t worthy of oversight. This would be a mistake with far-reaching consequences.

The RESTORE Act provides an opportunity to implement good policy with benefits for both the environment and the economy in the Gulf Coast states. Across the coast, environmental stewardship and economic growth go hand-in-hand. In Louisiana alone, commercial saltwater fishing is worth $3.1 billion and supports 34,000 jobs. Tourism in Alabama, Mississippi, and Louisiana brings in $23 billion a year, predominantly along the coast. Coastal wetlands and barrier islands furnish a number of benefits for people living inland, among them cleaner drinking water and attenuated storm surges.

Spent properly, RESTORE Act funds will go to legitimate functions of government: developing public goods, creating infrastructure, and undoing decades of failed federal resource management policies. The RESTORE Act offers a onetime chance for governments to address lingering and economically significant environmental issues.

Without oversight, however, it could turn into just another slush fund. And the ramifications for conservatives, both politically and policy-wise, could be disastrous. Besides the potential for waste, fraud, and abuse, there’s the possibility funds could go toward less-than-worthy ends. Small amounts of money from earlier settlements have already started to flow, and the results aren’t entirely encouraging. Mississippi, for example, has earmarked $15 million for a new minor league baseball stadium in Biloxi. The city has, as of yet, no minor league team.

Two major threats to conservative governance come to mind when considering how the money might be spent. First, there’s the risk lawmakers will steer funds to various initiatives with few or no environmental benefits and negative economic benefits—dubious “green jobs” projects and the like.

Worse, and less obvious, while the RESTORE Act offers a onetime windfall, it’s possible that funded projects could create ongoing liabilities for taxpayers. In other words, conservatives could inadvertently use this windfall to grow the governments of the Gulf Coast states permanently. One of the great conservative selling points of the RESTORE Act was that it created no new bureaucracies or perpetual claims on the public fisc. It would be a shame to undermine this principle in execution.

To guard against these dangers, the states receiving money under the RESTORE Act should spend it in a completely transparent fashion, not only because it’s the right thing to do, but because it’s a crucial test of conservatives’ ability to govern. What does that mean in practice?

At a minimum, transparent implementation means that all potential projects, along with their accompanying cost-benefit analyses, should be posted online long before funding decisions are made. This is essential to discovering if proponents of a project are cooking the books on its benefits, as has sometimes been the case with environmental enterprises. Contractor and subcontractor names and key information should likewise be disclosed, in as close to real time as possible.

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