Frequently Asked Questions
Guidelines for Citing BEA Information | ID: 554 | Created: Nov-03-2010
The BP oil spill in the Gulf of Mexico that occurred in the second quarter of 2010 affected economic activity in a number of ways, including disruption of fishing and of offshore drilling, loss of travel and tourism, and containment and clean-up efforts. The effects of these activities are generally embedded in the source data that underlie the estimation of GDP and the national accounts and cannot be separately identified. (See also FAQ 55: How are GDP and related income measures of the national accounts affected by a disaster?)
As a result of the oil spill, BP began paying claims to individuals, to businesses, and to governments for lost income, property damage, and reimbursement of clean-up costs, and created an escrow account to expedite payment of these claims. While the creation of escrow accounts is not recorded in the national accounts, payments made by BP (whether paid from the escrow account or paid by BP directly) are recorded on an accrual basis when the obligations are recognized. These payments are reflected in the national accounts as current transfer payments from business to persons and to governments; payments from BP to other businesses are offsetting intra-sectoral transactions and are netted out at the total. Payments for capital projects (such as building a barrier) or for major damages to assets will be classified as capital transfers.1 In addition, fines levied on BP for violations of federal laws, such as the Clean Water Act, are recorded as current transfer payments from business to the federal government.
In 2015, BP reached a settlement with the federal and several state governments for fines and damages associated with the oil spill; more information on this settlement can be found in FAQ 1165: What caused the large increase to government current transfer receipts from business in the fourth quarter of 2015?
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