Earmarking for Environmental Damage: From Oil Spills to Climate Change
| Date | 01 April 2011 |
| Author |
41 ELR 10334 ENVIRONMENTAL LAW REPORTER 4-2011
A R T I C L E S
Earmarking for
Environmental
Damage: From
Oil Spills to
Climate Change
by Janet E. Milne
Janet E. Milne is Professor of Law and Director of the
Environmental Tax Policy Institute at Vermont Law School.
Editors’ Summary
For a number of years, the U.S. federal tax code has
imposed a tax on petroleum that nances the Oil Spill
Liability Trust Fund, an earmarked fund to help cover
the costs of oil spills. BP’s massive 2010 oil spill in
the Gulf of Mexico provided an unprecedented test
for the Trust Fund and underscored the question of
who pays for the costs of oil spills. e BP spill taught
important lessons about the role of the tax and the
Trust Fund, and the federal regulatory regime govern-
ing the responsible parties’ liability.
On April 20, 2010, the Deepwater Horizon oil drill
rig in the Gulf of Mexico suered an explosion that
triggered a national environmental catastrophe of
unprecedented proportion. e Deepwater Horizon had
been drilling a deepwater well for BP about 50 miles o
the U.S. coastline.1 By April 20, it had drilled the well to its
nal depth of 18,360 feet2 and was nishing its work when,
as a result of a series of failures,3 pressure built in the well
until an explosion occurred at 9:49 p.m.4 e well’s blow-
out destroyed the Deepwater Horizon, killed 11 people, and
started an oil spill that poured approximately 4.9 million
barrels of oil into the Gulf of Mexico5 from breaks in the
well a mile underwater.6 After the oil had been owing for
almost two months, President Barack Obama said: “Already,
this oil spill is the worst environmental disaster America has
ever faced.”7 Oil and natural gas continued to ow until July
15 when the well was capped, 87 days after the explosion.8
A small environmental tax played a signicant role amid
the response to the oil spill. A federal eight-cent-per-barrel
tax on petroleum9 is dedicated to nancing the Oil Spill
Liability Trust Fund (the Trust Fund),10 which can cover
the cost of government’s emergency response and dam-
ages from oil spills. e Trust Fund and the federal liabil-
ity regime that surrounds it highlight the question of who
pays for costs of environmental damage.
1. BP, D H A I R 15 (Sept. 8,
2010), available at http://www.bp.com/liveassets/bp_internet/globalbp/glo-
balbp_uk_english/incident_response/STAGING/local_assets/downloads_
pdfs/Deepwater_Horizon_Accident_Investigation_Report.pdf [hereinafter
A I R].
2. Id. at 17.
3. Id. at 10-11.
4. Id. at 29.
5. J A G, R P D E O-
L V MC252#1, M 8 A 9, 2010,
1 (Aug. 16, 2010), http://w2.noaa.gov/sciencemissions/PDFs/JAG_Oxy-
gen_Report%20(FINAL%20090410).pdf. BP disputes the government’s
4.9-million-barrel estimate. N C BP D-
H O S O D, D: T G
O D F O D 346 n.76 (2011)
(discussing the oil spill’s economic consequences for the Gulf Coast) [here-
inafter N C F R].
6. Press Release, e White House, Remarks by the President to the Na-
tion on the BP Oil Spill (June 15, 2010), http://www.whitehouse.gov/
the-press-oce/remarks-president-nation-bp-oil-spill.
7. Id.
8. J A G, supra note 5, at 1. e well was nally “killed” on
Sept. 19, 2010. Press Release, BP, BP Conrms Successful Completion of
Well Kill Operations in the Gulf of Mexico (Sept. 19, 2010), http://www.
bp.com/genericarticle.do?categoryId=2012968&contentId=7065079.
9. Internal Revenue Code (I.R.C.) §4611 (2006).
10. Id. §9509.
content or conclusions, which remain the author’s sole responsibility.
Copyright © 2011 Environmental Law Institute®, Washington, DC. reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.
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