Sen. Nelson goes after BP for shifting oil-spill cleanup costs to taxpayers

Senator follows grilling of oil exec with legislation to strip tax break

Source: Sen. Bill Nelson, May 12, 2011

WASHINGTON, D.C.– Amid rising public angst over exorbitant gas prices and oil company profits, U.S. Sen. Bill Nelson took aim at one of the industry giants today for use of tax breaks to offset clean-up costs associated with last year’s devastating oil spill in the Gulf of Mexico.

During a hearing Thursday of the Senate Finance Committee, which was delving into gasoline prices and oil industry profits, Nelson pressed BP America chairman and president Lamar McKay on whether he thought it was wrong for the company to seek a tax write-off for costs associated with the spill.

Nelson’s questioning of BP came in response to the release of the company’s fourth quarter 2010 financial filing indicating it planned to generate $11.8 billion in tax savings as a result of the oil spill.  BP is treating costs associated with the clean-up, compensation to victims and related legal expenses as the ordinary costs of doing business, which are tax deductible.  The financial filing estimated BP’s oil-spill response would cost the company a total of $40.9 billion.

In a nutshell, that means taxpayers could be on the hook for about 29 percent of the clean-up cost. 

“Surely, the Gulf oil spill was the result of wrongdoing, and yet you want to claim that as a tax credit,” Nelson said at the hearing.  “(BP) may be entitled to this under the law, but that doesn’t make it right … .”

McKay defended the write off as a “standard business expense.”  

Just hours after that morning exchange with the BP executive, Nelson announced he had filed legislation to prevent all oil companies from shifting legal and clean-up costs associated with spills.

“BP agreed to pick up the entire tab for cleaning the mess up the Gulf,” Nelson said.  “Shifting these costs back to the taxpayer shouldn’t be allowed.”

Nelson noted that in unrelated cases involving company wrongdoing the companies had voluntarily agreed not to deduct such things as legal expenses.  His proposed legislation would prevent companies from deducting legal, clean-up and other costs associated with oil spills in U.S territorial waters as “ordinary and necessary” business expenses.  The legislation would apply to most of BP’s expenses, he said.

Tags: Bill Nelson, Close Big Oil Tax Loopholes Act