Gulf of Mexico Oil Spill: Boost from Near-Term Spending May Give Way to Credit Stress

9 page (4911 word) report published May 16, 2010
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...The oil leak resulting from the explosion of the Deepwater Horizon on April 20, 2010, off the coast of Louisiana may ultimately result in negative credit impacts for state and local governments. Any rating or outlook changes would follow careful assessment of the spill's impact on taxable property valuation, property tax levies, revenue performance, state aid, and timely debt service repayment. The spill is likely to cause extensive environmental damage to the states that border the Gulf of Mexico. But, as BP PLC (Aa1/negative) has pledged to pay for all cleanup costs, as well as claims of damages, and the federal government has pledged significant resources, it appears that the long-term economic and financial impact of the spill on the states of Louisiana, Mississippi, and Alabama will be manageable. While the Deepwater Horizon oil spill may have a significant environmental impact on the Gulf region, the short-term economic boom related to clean-up efforts will likely give way over the...

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