From the U.S. Government Accountability Office, www.gao.gov Transcript for: Watchdog Report: Managing Costs Resulting from the Gulf Oil Spill Audio interview by GAO staff with Susan Ragland, Director, Financial Management and Assurance Related GAO Work: GAO-11-90R: Oil Spill Liability Trust Fund: Overview of Claims and Cost Reimbursement Processes and Potential Risks Released on: November 12, 2010 [ Background Music ] [ Narrator: ] Welcome to GAO's Watchdog Report, your source for news and information from the Government Accountability Office. It's November 12th, 2010. The full extent of costs resulting from the April 20th Deepwater Horizon oil spill will not be known for some time, but early estimates put it in the tens of billions of dollars. A group led by Susan Ragland, Director in GAO's Financial Management and Assurance Team, recently examined the mechanisms that have been set up to manage these costs. GAO's Jeremy Cluchey sat down with Susan to learn more. [ Jeremy Cluchey: ] Can you describe the structure that was set up by the U.S. government to manage the costs resulting from the Deepwater oil spill? [ Susan Ragland: ] Certainly. There are several mechanisms that were established under the Oil Pollution Act of 1990, so there's a National Pollution Fund Center, which is set up to pay for costs. If responsible parties can be identified, then they can try to recover the cost from the responsible parties. So that's one of the main mechanisms for funding initial responses. There's also the Integrated Services Team, which has been established to respond and coordinate information needed related to the Deepwater Horizon spill. And the Department of Justice has also been involved in trying to help ensure that taxpayers are protected and that fraud and waste and abuse claims are investigated as we go forward. [ Jeremy Cluchey: ] And what role does the oil spill liability trust fund play in the management of these costs? [ Susan Ragland: ] The oil spill liability trust fund is funded by tax revenues, and it's in place to pay costs in an emergency basis, and then they submitted bills to the responsible parties, who then pay back the money to the trust fund. And so the trust fund is a key mechanism. It has a liability cap of one billion dollars per incident, and so it limits the federal government's exposure to some extent. [ Jeremy Cluchey: ] What has the fund billed BP so far? [ Susan Ragland: ] The fund has billed BP $581 million, and BP has paid $518 million back to the fund. [ Jeremy Cluchey: ] And then in the long term, what are the costs likely to look like? [ Susan Ragland: ] Well, in the long term, it seems like the costs are very uncertain. There've been estimates of tens of billion dollars of costs that could result, and so BP has established an account to be funded through the year 2014 with $20 billion to help pay for costs. The total amount of costs is very uncertain, and so therefore it still poses a risk to the federal government. [ Jeremy Cluchey: ] And building on that, your team considered the factors that could potentially lead to the federal government footing the bill for some of these costs. What did you conclude? [ Susan Ragland: ] We concluded that there are financial risks to the federal government, in the event that there are events that adversely affect BP or other responsible party's financial condition or their ability to pay the claims that are coming from the Deepwater Horizon spill. And as such it remains unclear whether the federal government will have to cover costs from the Deepwater Horizon oil spill, and if so the potential amounts that could be involved. [ Jeremy Cluchey: ] Your team also looked at the reimbursement procedures being used and identified some key issues there. What are those issues? [ Susan Ragland: ] In terms of some of the policies and procedures that we looked at at the National Pollution Fund Center, there were some areas where the policies and procedures were not up to date or they were unclear. For example, there was a lack of clarity regarding how to notify the responsible parties that they have been designated as responsible parties. Other things that we found were that they have a billing procedure for Department of Defense that wasn't reflected in their policies and procedures. And some of their policies were dated back from when the Coast Guard was in the Department of Transportation. The National Pollution Fund Center is part of the Coast Guard, and so we just had a concern that we need to make sure that everything is really up to date and really in good shape so that as we're facing these costs coming in that we're handling everything in the correct manner. [ Background Music ] [ Narrator: ] To learn more, visit GAO's Web site at gao.gov and be sure to tune in to the next edition of GAO's Watchdog Report for more from the congressional watchdog, the Government Accountability Office.