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Project on Government Oversight




Penalties May Not Surpass BP's Oil Spill Tax Credit

August 4, 2010 


Andrew Restuccia of The Washington Independent has a good summary of the some of the major numbers to consider in the Deepwater Horizon Disaster in the Gulf. BP could pay as much as $17.6 billion in penalties if they are found to be grossly negligent, but if they're not, their penalty tab will be $4.5 billion—or, about $5.4 billion less than the $10 billion reduction in U.S. tax obligations BP expects as a result of the oil spill.

Senator Bill Nelson (D-FL) has asked the Finance Committee to probe BP's write-off, and Representative Peter Welch (D-VT) has introduced legislation to try to close the loophole. Reps. Eliot Engel (D-NY) and Raul Grijalva (D-AZ) have also introduced separate bills to try and prevent BP's tax boon. For those people who don't cuddle up with the tax code, BP cannot claim any penalties as tax-exempt losses.

While we're talking numbers, right now the estimate is that the spill released 4.8 million barrels of oil. That brings the rough estimate of royalties owed to taxpayers to $74.1 million.

Methodology: Royalties owed = number of barrels X royalty rate X cost of one barrel of oil. The possibility of deductions (such as for transportation cost—which we've seen that BP will likely claim) potentially complicates these calculations.


Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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