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New BP Gulf of Mexico Controversy

By Emac's Bottom LineFOXBusiness

Oil giant BP (NYSE:BP) must fully disclose the details about its $18.7 billion out-of-court settlement with the Department of Justice over the 2010 BP Deepwater Horizon oil spill, which killed 11 workers and spilled millions of barrels of oil into the Gulf of Mexico.

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Watchdogs at the U.S. Public Interest Research Group said there is no guaranty that the settlement stops BP from deducting the settlement on its tax returns, which could possibly reduce the British oil company’s federal tax liability by $4.6 billion. BP has reported that it lost $5.8 billion in the second quarter, due to the cost of the settlement as well as the roughly 40 percent drop in oil prices. The company has reportedly booked total provisions for the explosion at about $54.6 billion. BP is declining to comment.

U.S. Senator Bill Nelson (D-FL) has also sent a letter to the U.S. Department of Justice demanding that the settlement between BP, the Justice Department and five Gulf states be publicly disclosed and that BP be forbidden from writing off their settlement payments as a tax deduction.

“Senator Nelson’s letter is common sense,” said Phineas Baxandall, senior policy analyst for the U.S. Public Interest Research Group, in a statement. “When the nation’s highest law enforcer cuts a deal with BP to pay its way out of facing trial for crimes that led to the nation’s biggest oil spill, then the public deserves to know right away what’s in the deal. The Justice Department must also ensure that the oil giant can’t just shift these costs back onto the public by treating the settlement as a giant tax deduction.”

Senator Nelson’s letter addressed to Attorney General Loretta Lynch urged the Attorney General to consider holding a public hearing, so as “to get details out to the public.” The senator also urged Lynch to “open up a comment period as soon as possible.” The letter stated, “BP should not be allowed to claim a tax deduction for these dollars, and the final settlement should reflect that.”

The Senator further noted that, when you run the math on BP’s settlement, “the Department of Justice has agreed that BP will pay a civil Clean Water Act fine of only $1,724 per barrel of crude spilled into the Gulf of Mexico. This falls far short of the $4,300 per barrel maximum fine faced by BP for gross negligence and willful misconduct.” A judge already ruled that BP’s spill constituted gross negligence.

“There’s no question here about whether BP committed wrongdoing,” Baxandall added in the statement. “The law clearly states that fines and penalties not be allowed as tax deductions so businesses won’t regard such payments like business-as-usual. If there had been no settlement deal and the judge had been left to order BP to pay a penalty, then the sum wouldn’t be tax deductible. There will be a huge loophole unless the Justice Department specifies that their settlement likewise isn’t a deductible business expense. Unless they do so, BP will take at least a $4.6 billion tax windfall that will end up falling on the shoulders of ordinary taxpayers. That’s not right.”

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