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Deepwater Horizon Oil Spill: Actions Needed to Reduce Evolving but Uncertain Federal Financial Risks

GAO-12-86 Published: Oct 24, 2011. Publicly Released: Oct 24, 2011.
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On April 20, 2010, an explosion of the Deepwater Horizon oil rig leased by BP America Production Company (BP) resulted in a significant oil spill. GAO was requested to (1) identify the financial risks to the federal government resulting from oil spills, particularly Deepwater Horizon, (2) assess the Coast Guard's internal controls for ensuring that processes and payments for spill-related cost reimbursements and claims related to the spill are appropriate, and (3) describe the extent to which the federal government oversees the BP and Gulf Coast Claims Facility cost reimbursement and claims processes. We issued status reports in November 2010 and April 2011. This is the third and final report related to these objectives. We obtained and analyzed data on costs incurred from April 2010 through May 2011 and claims submitted and processed from September 2010 through May 2011. We reviewed relevant policies and procedures, interviewed officials and staff at key federal departments and agencies, and tested a sample of claims processed and cost reimbursements paid for compliance with internal controls..


Matter for Congressional Consideration

Matter Status Comments
Congress may wish to consider the options for funding the Oil Spill Liability Trust Fund as well as the optimal level of funding to be maintained in the Fund, in light of the expiration of the Fund's per barrel tax funding source in 2017.
Closed – Implemented
The Congress introduced Senate bills S.329 (on February 14, 2013) and House bill HR.5745 (on May 15, 2012), which would increase the per-barrel tax on domestic and imported oil that finances the Oil Spill Liability Trust. As of June 2013, Congress had not yet passed legislation to provide funding options or optimal level of funding. However, as a result of introducing these bills in the Senate and House, Congress has demonstrated that it is considering options for funding the Oil Spill Liability Trust Fund as well as the optimal level of funding to be maintained in the Fund.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Homeland Security In order to provide guidance for responding to a spill of national significance and build on lessons learned, the Secretary of Homeland Security should direct the Director of the Coast Guard's National Pollution Funds Center to finalize the revisions the Coast Guard is drafting to its Claims Adjudication Division's Standard Operating Procedures to include specific required steps for processing claims received in the event of a spill of national significance.
Closed – Implemented
On October 31, 2011, the National Pollution Fund Center's (NPFC) Claims Adjudication Division issued revised procedures to include specific guidance on steps to be followed for processing claims received related to a significant oil spill. The updated guidance includes steps for forecasting a surge in claims following a significant spill. In addition to specific guidance on how to process claims received, the revised guidance includes a list of Frequently Asked Questions Resulting from the Deepwater Horizon Incident.

Full Report

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Claims processingClaims settlementCompensationDamage claimsDisaster responsibilitiesEnvironmental cleanupsExpense claimsFederal agenciesFunds managementImpacted areasInternal controlsLessons learnedLiability of environmental damagesNatural resourcesOil spillsReimbursements to governmentRisk managementEnvironmental restorationFinancial conditionPolicies and proceduresReimbursements