Friday, October 29, 2010

Valuation in the Gulf

From USA Today

Note the distinction between monetary compensation and compensatory restoration.

I've done some work on the NRDA process and damages to fisheries from small spills. Obviously, the Gulf spill falls under "type B".


kevin said...

It seems to me that BP would never settle outside of court? If BP and other responsible parties have an opportunity to hire their own economist team to combat those that are valuating the total economic damage. This process will take years. Will these companies ever actually pay off this number anyway? Valdez is still not payed for.

Amanda K said...

While it is a fair question to wonder whether BP will ever actually fully pay off whatever number the economists come up with, it seems to me to be somewhat beside the point. Whether BP ever pays off the full cost of damage or not, economists must still try to come up with as accurate an estimate as possible. More than likely, BP will want to take this issue to court so as to be able to send out their own environmental economists to do research and come up with new estimates. Also more than likely, the BP economists will come up with an estimate of damage that is much lower than the amount initially suggested. However, the environmental damage from this disaster is so catastrophic that it seems to me as though no matter who is doing the environmental research, BP will have to pay a huge amount of money. So, before we start questioning whether the company will ever pay off the full cost of environmental damage, a final cost must be agreed upon. Determining this cost is obviously going to take years. What if BP pays for all costs associated with determining a final environmental damage cost . . . should this be deducted from the final amount BP is asked to pay or should they be in addition to?

Ryan McKnight said...

Based on the USA Today article, it seems that the federal government realizes the potential length of the economic and legal battle ahead over monetary compensation and is attempting to speed up the BP financed restoration process.

"The [federal] government wants to launch early restoration projects if BP and the other companies cooperate"