The Daily Caller

The Daily Caller
Fire boat response crews battle the blazing remnants of the offshore oil rig Deepwater Horizon, off Louisiana, in this April 21, 2010 file handout image. REUTERS/U.S. Coast Guard/Files/Handout Fire boat response crews battle the blazing remnants of the offshore oil rig Deepwater Horizon, off Louisiana, in this April 21, 2010 file handout image. REUTERS/U.S. Coast Guard/Files/Handout  

Deepwater Horizon restoration funding must be transparent and avoid cronyism

Photo of Daniel Rothschild
Daniel Rothschild
Director of State Projects, R Street Institute

Next month will mark four years since the Deepwater Horizon oil rig exploded fifty miles off the Louisiana coast, killing eleven men and spilling over four million barrels of oil into the Gulf. While initial predictions about the spill’s likely economic and ecological effects fortunately proved to be overblown, the Gulf’s economy continues to struggle and its natural environment is still suffering. To wit: last month, a half-ton tar mat from the spill washed ashore near Pensacola, Florida.

But the coast’s fortunes are looking up. The Treasury Department will soon outline how state and local governments across the Gulf Coast can draw down funds from the Gulf Coast Restoration Trust Fund, an account established with civil fines paid after the 2010 Deepwater Horizon oil spill. Whether these funds will be used effectively and efficiently — or squandered on pet projects and cronyism — is ultimately not in the hands of Treasury officials, but policy makers in the coastal states.

This devolution of authority was the express intent of Congress, which in 2012 passed the RESTORE Act. This landmark bill places 80 percent of the Clean Water Act fines paid by oil company BP and rig operator Transocean into a Gulf Coast Restoration Trust Fund. The vast majority of these funds will go either to individual states or to a council led by the governors of the five Gulf states. Depending on how litigation against BP resolves, the total amount available to the fund could be as much as $14 billion.

Conservatives have supported this policy from day one, and they should continue to endorse it and closely monitor its implementation. After all, giving state governments rather than Washington the responsibility to develop and execute projects that have positive environmental and economic benefits for the Gulf Coast reflects important conservative values: it allows states to address the particular needs of their populations and doesn’t try to impose a bureaucratically-driven, one-size-fits-all model on five states and thousands of miles of shoreline.

But in order for the RESTORE Act to live up to its potential, spending decisions must be made in a completely transparent manner — and funds absolutely cannot go to pet projects and special favors for particular industries or companies.

Fortunately there are good efforts afoot on the transparency side. Mississippi has launched a web site where citizens can suggest projects to fund with RESTORE Act dollars. In Florida, where the counties are primarily responsible for identifying and executing projects, a bipartisan bill in the legislature would require every proposed appropriation to be posted online for at least 30 days before it comes up for a vote. And in Louisiana, a proposed constitutional amendment would require that all funds the state receives under the RESTORE Act go to funding the state’s coastal protection infrastructure plan.

Spending this windfall on projects that benefit the economy and environment of the coast is consistent with limited government principles — provided it is done correctly. Building public infrastructure, developing public goods, and mitigating the deleterious effects of failed government projects are all appropriate activities for governments to undertake. If done properly, they can save taxpayers future costs and create an environment conducive to economic growth.

But in order to ensure that funds are spent in a way that benefits the broader economy, it is critical that policymakers steer funds towards projects with broad benefits, not those that just benefit certain favored groups. Too often, policymakers use targeted tax incentives or giveaways to politically connected companies as a means of trying to spur investment. But this is little more than industrial policy conducted through the tax code, and it would be a terrible use of RESTORE Act funds.

Projects funded through the RESTORE Act must be evaluated by proper metrics. This means examining likely costs and benefits in order to ensure taxpayers get the most “bang for the buck.” Looking just at the number of “jobs created” by a program, for instance, is a poor way to evaluate whether it provides value for taxpayers.

With the RESTORE Act, Congress made a historic decision to allow the Gulf Coast states to take the lead in developing stronger coastal economies and more resilient natural environments. The onus is now on policymakers in these states to ensure that projects are selected and funds spent transparently and efficiently on projects with benefits that accrue both today and into the future.