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We’re now into day way too many of the BP oil spill, and the President has just yesterday been down on the Louisiana coast—again.

There have been suggestions that the Administration should take action to essentially push BP out of the way and take over the work itself, particularly as it relates to the cleanup.

It may have even occurred to you that an official declaration of some sort might be needed, in order to bring the full power of the Feds into play.

That’s some good thinking, but before we go jumping right into declaring things we better understand the law, because if we don’t, we could actually make things worse.

It was a deathbed scene, but the director was not satisfied with the hero’s acting.

"Come on", he cried, "Put more life in your dying!"

--From "10,000 Jokes, Toasts, & Stories", Lewis and Faye Copeland, Editors

So right off the bat, we need to give credit to Francis X. McCarthy of the Congressional Research Service, who put together "Potential Stafford Act Declarations for the Gulf Coast Oil Spill: Issues for Congress", which will, unless indicated otherwise, be our source for today’s discussion, and the most excellent Steven Aftergood, who, among his other good works, sends me those "Secrecy News" emails that should be coming to every one of your inboxes as well.

And with that said, let’s get to work:

In a situation such as the oil spill, the Stafford Act, which is the law governing emergency and disaster responses, gives the President a fairly limited number of options: he can do nothing, leaving BP as the lead party in the response, or he can declare, on his own initiative, that an "emergency" exists. He can also agree to respond if the Governor of a State declares that an emergency or "major disaster" has occurred within that State.

So which means what?

From the Stafford Act itself (42 USC 5122):

"(1) Emergency.— "Emergency" means any occasion or instance for which, in the determination of the President, Federal assistance is needed to supplement State and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States.

(2) Major disaster.— "Major disaster" means any natural catastrophe (including any hurricane, tornado, storm, high water, winddriven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under this chapter to supplement the efforts and available resources of States, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby."

It’s not just terminology, either...there are functional differences as well.

The biggest: if the President declares an emergency, on his own initiative, FEMA will not be permitted to offer Disaster Unemployment Assistance, which is a program that does just what you think it does for people like South Louisiana’s fishers and tourism workers. If the Governor declares a disaster, on the other hand, such assistance would become available.

Other "disaster-only" assistance would include paying for "emergency protective measures"; this means that FEMA, and not the State, would bear some of the cost of building the proposed "barrier islands" that might keep some of the oil off the coast.

For most emergency and disaster assistance the Federal "cost share" is 75%; it can be modified up to 100% if the President so declares.

So far, so good...but there is another side to this story.

In the aftermath of the Exxon Valdez incident the then-Governor of Alaska, Steve Cowper, tried, twice, to get George Bush the First to declare a disaster. He was unwilling to do so.

The reasoning behind this was that...well, how about if I just let you hear the story firsthand:

"The Department of Justice opposed a declaration of disaster by then-President George H. W. Bush on the basis that it might impact adversely the case of the United States against Exxon. When asked at a Senate Appropriations Committee hearing by Senator Ted Stevens (R-Alaska) why no declaration of disaster had occurred, the then-Acting General Counsel of FEMA, George Watson, said on the record that he had issued a legal opinion stating that no declaration of an oil spill could be made under the Stafford Act.

When Sen. Stevens asked for a copy of the opinion, Mr. Watson said he would furnish one. Instead of an opinion, a somewhat garbled statement was given by FEMA’s congressional liaison for insertion in the record. The statement basically concluded that where a parallel statutory scheme offered both compensation and better litigation rights to the United States than the Stafford Act, then the president would not declare a disaster or emergency."

The money for these responses comes from the Disaster Relief Fund. This Fund is not part of the annual Federal Budget appropriations process; instead, it’s refilled, as the need arises, by supplemental appropriations.

The Fund is almost empty at the moment, and even before this event it was predicted that the money could run out by this month. (It’s estimated that the Fund is spending about $350 million a month to mitigate the various disasters currently on the books, with only about $600 million in the Fund as of May.)

A supplemental appropriations bill, part of which would provide $5.1 billion for the Fund, to cover past and future expenses, is before Congress right now (H.R. 4899).

The Senate wants its version of the bill adopted (it’s not just a FEMA bill: there’s lots of juicy defense appropriations in there as well, among other allocations), and they’ve asked for a House/Senate conference. Almost a third of the Senate is on the Conference Committee, so you know there are a lot of negotiations ahead—unless, suddenly, a new sense of urgency is felt by all parties involved.  

(Fun Fact: There was a large cleanup of spilled oil associated with Katrina, to the tune of about 9 million gallons.)

We need to stop, for just a moment, and talk about two other potential sources of cleanup funding out there: the Oil Spill Liability Trust Fund (OSLTF), and, possibly, the EPA’s Superfund.

If BP should turn out to be unwilling to pay the billings being submitted by the US Government for cleanup and other expenses, or if the Company denies claims from third parties that the Feds think should be paid, then the Trust Fund is available to pay claims while collection actions against BP are underway.

However...the Fund can only pay claims associated with oil pollution. Claims related to pollution caused by other hazardous materials...like dispersant...cannot be paid by this Fund.

The normal solution would be to charge those expenses to the Superfund, but there’s a "however" attached to that. Long story short, the Superfund cannot pay for claims related to pollution in bodies of water.

There’s more: the OSLTF is limited, by law, to $1 billion, maximum, per incident, with only $500 million of that available for the natural resources cleanup associated with that incident.

(Fun Fact Number Two: There is such a thing as microwaveable haggis.)

At about this point, you’re probably thinking that we should declare something pretty much right away.

Not so fast there, Gentle Reader...because here’s the "you could make things worse" part:

If the Stafford Act is invoked, and an emergency or disaster is declared:

"Any person who intentionally causes a condition for which Federal assistance is provided under this Act or under any other Federal law as a result of a declaration of a major disaster or emergency under this Act shall be liable to the United States for the reasonable costs incurred by the United States in responding to such disaster or emergency to the extent that such costs are attributable to the intentional act or omission of such person which caused such condition."

And therein lies the trouble.

If BP can successfully argue that they did not intentionally spill that oil, then the ability to recover money spent cleaning it up would be severely limited, if not entirely lost.

So as of this morning, that’s where we’re at: there’s a belief that BP is not doing all it can to fix this, or to clean it up, and that one way to get around that problem would be for the Federal Government to invoke emergency powers and take over the cleanup itself.

The Oil Pollution Act of 1990 provides some capability in this area, through the Disaster Relief Fund, but the money available for the task is limited, and probably insufficient for the work that needs to be done.

And while the Stafford Act provides additional authorities of its own, there is a real possibility that invoking the Act will let BP off the hook for the giant legal liability that appears to be facing them down today.

It’s a really tough situation for a national leader, and if you ever wondered why Barack Obama’s hair seems a bit grayer lately...well, this might be part of the reason why.

Originally posted to fake consultant on Sat Jun 05, 2010 at 07:24 AM PDT.

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