The estimate for government current transfer receipts from business in the fourth quarter of 2015 included a $20.8 billion ($83.2 billion at an annual rate) settlement between BP, the federal government, and the five states that were most affected by the 2010 oil spill in the Gulf of Mexico. The settlement included a fine for violation of the Clean Water Act and funds intended to restore and conserve natural resources, resolve economic damages, and pay for future unknown damages. The entire settlement was recorded in the national income and product accounts (NIPAs) in the fourth quarter as a current business transfer payment to government1; this settlement was split between federal and state and local governments according to the consent decree released by the Department of Justice. 2
The NIPA estimate of corporate profits will also recognize the large expense that BP accrued in the fourth quarter related to this settlement. The reduction in corporate profits will offset the increase in business transfer payments that occurred as result of the settlement. Thus, there will be no net effect on gross domestic income.
Effects of the BP oil spill on the NIPAs are not limited to this settlement. The effects on regional economic activity related to disruption of commerce, loss of travel and tourism, and containment and clean-up efforts are discussed in FAQ 554: What are the effects of the BP oil spill on GDP and the national accounts?
2To find the consent decree and other documents related to the incident, go to: http://www.justice.gov/enrd/deepwater-horizon