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BP Oil Spill Settlements to Non-Profits: Mechanics and Lessons
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BP Oil Spill Settlements to Non-Profits: Mechanics and Lessons

In 2011, BP America's foundation made grants of $14.2 million to U.S.-based nonprofits and just short of $6 million to overseas charities. The foundation's 990 indicated three grants to Alabama-based organizations (two United Ways, one Red Cross), one in Mississippi (United Way), and none in Louisiana or Florida, the four states hardest hit by the Deepwater Horizon oil rig explosion (killing 11 workers) and subsequent oil spill in 2010.

In comparison, there were 12 BP Foundation grants to Alaskan organizations. But the Deepwater Horizon disaster occurred not in Alaska, but in the Gulf of Mexico, southeast of Louisiana, becoming the biggest oil spill in U.S. history and perhaps the nation's worst environmental disaster ever. BP's disaster slammed the Gulf Coast economy, still reeling at that point from Hurricane Katrina, with impacts on marine wildlife, fishing, tourism, and public health. Putting a dollar figure to the economic impact of the oil spill is all but impossible. However, BP is going to be shelling out loads of money to Gulf Area nonprofits-and plenty of other entities-for a very long time as a result of the devastation it caused to the entire Gulf Coast economy, enveloping nonprofits and their revenues in its wake. You can add a couple of zeroes to whatever moneys BP was used to distributing to nonprofits through its corporate foundation, however, as the costs to BP under this settlement formula are going to reach well into the billions.

Why? In past settlements of corporate wrongdoing or negligence, a fund would be created and an administrator would examine each claim on its merits to determine whether the claimant suffered injury due to the corporation's behavior. The new BP settlement, replacing the slow-moving fund that had been slogging along with payments, is different. If your nonprofit entity existed in the region of impact sufficiently long enough prior to the Deepwater Horizon disaster, and if it can demonstrate that it suffered losses, you get compensation as per a court-ordered formula regardless of the degree, if any, to which BP caused those losses. Moreover, it's not a first-come, first-served capped fund. There is no cap on BP's liabilities under this settlement.

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