Alabama estimates oil spill could cost coastal areas $824 million in lost earnings


The state’s claim to BP for $148 million in lost tax revenues estimated that workers would suffer $824 million in lost earnings, just from the slice of Mobile and Baldwin counties closest to the Gulf of Mexico.

That could represent about 5 percent of all the income earned in the two counties in a year, though the state’s analysis doesn’t account for losses from the whole counties.

Mobile and Baldwin counties had personal income of $16.24 billion in 2008, the most recent year with available federal figures. That represents all income received by anyone from any source, including wages, business owner profits, interest, dividends, rent and government transfers.

How the state got to its numbers is still unclear. Officials have released only three August memos that Jeff Emerson, a spokesman for Gov. Bob Riley, said represent all written material that’s been given to BP PLC.

“All the additional information provided to BP to support these numbers was provided during several hours-long meetings that took place,” Emerson wrote in an e-mail to the Press-Register. “BP had several questions about the methodology and the analysis, and our side answered all the questions BP had.”

Keivan Deravi, the Auburn University Montgomery professor who conducted the analysis, said he has been instructed to refer all questions to Riley and state Finance Department officials. When asked Thursday for calculations and materials that support the analysis, Emerson said he would seek them.

“The analysis attempted to isolate and quantify the adverse economic impact of the incident on tourism, real estate, retail, commercial and recreational fishing, seafood processing and other limited economic activities,” Deravi wrote in an August 12 memo to acting Finance Director Bill Newton. “The analysis did not include all segments of the economy, such as lost property values, and was conducted for a limited set of coastal ZIP codes.”

Deravi wrote that the analysis focused on Grand Bay, Bayou La Batre, Coden and Dauphin Island in Mobile County, and Orange Beach, Gulf Shores, Foley, Bon Secour, Magnolia Springs, Elberta and Lillian in Baldwin County.

Deravi wrote that he planned to continue to refine his estimates and provide BP with monthly revisions, as well as projections of losses for the balance of the state and losses that would occur in the budget year that begins Oct. 1.

Deravi wrote that the state would assist county and city governments in making claims. Though BP passed claims from private businesses and individuals to the Ken Feinberg-led Gulf Coast Claims Facility, it continues to handle government claims.

Deravi maintains a computer model of the state’s economic activity, which he uses to make projections for the state. He wrote that projections of the $148 million in lost tax revenue, using two different methods, “converged within a close range.”

Last week, BP told Riley that it was putting the claim for lost tax revenue on hold, in part because Attorney General Troy King filed suit against the majority owner of the Deepwater Horizon well on Aug 12, the same day Riley submitted the claim.

No other state has yet sued BP or filed a claim for lost tax revenue.

Riley and King have been at odds over the lawsuit, and Riley blamed King for the state not getting the money before the Sept. 30 end of the current budget year.

Riley imposed an additional 2 percent cut on the state education budget, on top of an earlier 7.5 percent cut. King has said he doesn’t believe BP will voluntarily pay and has accused Riley of being naive.

Estimates of the economic impact of the oil spill have varied widely. BBVA Compass estimated that it could cost Alabama’s economy $200 million or more.

Moody’s estimated that the spill could cost Alabama $62.7 million in economic output, but only if oil continued to spew until spring 2011.

In a milder scenario, Moody’s foresaw no significant impact in Alabama, and $1.2 billion in losses across the entire Gulf Coast, with the worst losses in Florida and Louisiana.

Add comment

Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
Cooper Law Firm

Follow Us

© Stuart H Smith, LLC
Share This