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GAO-11-90R 1 (2010-11-12)

handle is hein.gao/gaobaanvi0001 and id is 1 raw text is: i &GAO0 Accountibiity Integrity * Reliaility United States Government Accountability Office Washington, DC 20548 November 12, 2010 Congressional Requesters Subject: Deepwater Horizon Oil Spill: Preliminary Assessment of Federal Financial Risks and Cost Reimbursement and Notification Policies and Procedures On April 20, 2010, an oil spill of national significance in the Gulf of Mexico followed an explosion on the mobile offshore drilling unit Deepwater Horizon (the Deepwater Horizon oil spill). The Deepwater Horizon was leased by BP America Production Company (BP) as part of the Macondo project.' 152 days later, on September 19, 2010, BP confirmed the completion of cementing operations to prevent further oil from spilling from the Macondo Prospect well to which the Deepwater Horizon was attached when it exploded. In order to coordinate the federal response to the Deepwater Horizon oil spill, the National Incident Commander established the Deepwater Integrated Services Team (IST) consisting of 18 federal agencies, including the U.S. Coast Guard and the Department of Justice (DOJ). The U.S. Coast Guard's National Pollution Funds Center (NPFC) designated two BP subsidiaries-BP Exploration and Production and its guarantor, BP Corporation North America, Inc.-and five other companies as Responsible Parties for Deepwater Horizon oil spill related claims. Shortly after the spill, at the direction of NPFC, BP established a facility to receive and process all claims against Responsible Parties. In June 2010, as part of an oral agreement between the administration and BP, BP established a new claims processing facility-the Gulf Coast Claims Facility (GCCF). GCCF began operations on August 23, 2010, and is responsible for handling claims from individuals and businesses for damages resulting from the Deepwater Horizon oil spill. BP also established an irrevocable trust (Trust), to which BP is to provide a total of $20 billion by 2014, primarily for the purpose of paying GCCF and other claims related to the Deepwater Horizon oil spill.2 (Enclosure IV provides a timeline of Deepwater Horizon oil spill events.) The total cost to clean up this massive and potentially unprecedented spill, the damage to the environment, as well as the potential impact to the livelihood and economic status of businesses and individuals in the region will undoubtedly be significant, with current estimates from BP and Oxford Economics in the tens of billions of dollars.3 However, the full extent of such costs and 1BP America Production Company, a subsidiary of BP p.l.c., leased the Deepwater Horizon from Transocean Holdings LLC, a subsidiary of Transocean Limited. Transocean Limited is the world's largest offshore drilling contractor comprising numerous subsidiaries and jointly controlled entities and associates. Unless otherwise referring to specific subsidiaries or affiliates, we refer to Transocean Limited and its components separately or jointly as Transocean. BP p.l.c. is an international oil and gas company comprising numerous subsidiaries and jointly controlled entities and associates. Unless otherwise referring to specific subsidiaries or affiliates, we refer to BP p.l.c. and its components separately or jointly as BP. BP was originally incorporated in 1909 in England and Wales as British Petroleum and changed its name in 2001. 'BP established the trust under Delaware law, which generally provides that the principal of the trust can be used only for the purposes stated in the trust agreement and that the terms of the trust agreement cannot be modified and are legally enforceable by the trustees. 3BP, BPp.l.c. Group results, second quarter and half year 2010, London, July 27, 2010 and Oxford Economics, Potential Impact of the Gulf Oil Spill on Tourism, July 22, 2010. GAO-1 1-90R Oil Spill Liability Trust Fund

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