Nov. 15, 2011 – 11:07 p.m.

Push to Send Fines From Oil Spill to Gulf Meets Deficit Headwinds

A bipartisan effort by Gulf Coast lawmakers to direct billions of dollars in fines resulting from last year’s oil spill to regional restoration efforts is encountering anti-deficit headwinds.

Led by Sens. Mary L. Landrieu, D-La., and Richard C. Shelby, R-Ala., backers of the effort are pressing for a quick vote on a bill (S 1400) that would direct 80 percent of the Clean Water Act (PL 95-217) penalties from the 2010 Deepwater Horizon oil spill to the five gulf states. But budget scorekeepers say the legislation would require more than $1 billion in offsets.

While the federal government and BP still must negotiate the total amount of the fines, the oil company faces penalties of $5.4 billion to $21.1 billion. Under current law, that money would go into the federal government’s general fund.

A recent Congressional Budget Office scoring may complicate prospects for the bill, which has been gaining support. CBO concluded that directing the fine revenue to regional recovery would cost the government $1.2 billion over 10 years and trigger the pay-as-you-go law (PL 111-139).

Landrieu said she is undeterred. “We were expecting it, we understand that we have to offset it, we’re prepared to do so and we’re working to get 60 votes,” she said, while declining to identify possible pay-fors. “We have no intention of increasing the deficit to do this.”

Still, CBO’s estimate serves as a reminder of the difficulties of legislating in the current deficit-driven climate. The Joint Select Committee on Deficit Reduction has a Nov. 23 deadline to offer a plan to reduce deficit spending by at least $1.2 trillion over 10 years. Should that effort fail, automatic cuts would be imposed by the summer’s debt limit law (PL 112-25).

But Landrieu said the idea of directing BP’s fines to regional projects has widespread backing in both parties, among environmentalists, from industry and from President Obama. “There’s virtually no one that we know of yet in opposition,” she said.

The legislation and a House companion measure (HR 3096) would distribute the penalties among five states — Texas, Louisiana, Mississippi, Alabama and Florida — under a formula that took months for the region’s lawmakers to negotiate.

And while the bill’s supporters hope for a much larger payout than the $2.3 billion in penalties that CBO estimated based on past cases, Landrieu said the $1.2 billion in necessary offsets would not change. “This is the only offset that’s going to be required, regardless of what the settlement is,” she said.

Landrieu and Shelby are pressing Senate leaders for floor time for a “very short stand-alone debate” before the end of the year, although Landrieu said the measure could also be offered as an amendment to an appropriations bill.

The House version of the bill has been moving more slowly. Stephen Bell, a spokesman for lead sponsor Steve Scalise, R-La., wrote in an email that the House bill is unlikely to be scored by CBO until it is approved by a committee. An initial hearing in the House Transportation and Infrastructure Committee is expected to take place Dec. 7.