BP, Gulf States Reach Record $18.7B Oil Spill Settlement
NEW ORLEANS — BP has reached an $18.7-billion settlement with five Gulf states, bringing to a close a five-year legal battle stemming from the company's 2010 Deepwater Horizon accident and subsequent oil spill in the Gulf of Mexico.
An outline filed in federal court said the settlement money will be used to resolve the Clean Water Act penalties; resolve natural resources damage claims; settle economic claims; and resolve economic damage claims of local governments, The Associated Press reported.
According to BP, its U.S. Upstream subsidiary, BP Exploration and Production Inc. (BPXP), has executed the settlement agreements with the federal government and five Gulf Coast states. The agreement with Alabama, Florida, Louisiana, Mississippi and Texas also includes settlement of claims made by more than 400 local government entities.
"Five years ago, we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise. We have made significant progress, and with this agreement, we provide a path to closure for BP and the Gulf. It resolves the company's largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved," said Carl-Henric Svanberg, BP's chairman.
"In deciding to follow this path, the board has balanced the risks, timing and consequences associated with many years of litigation against its wish for the company to be able to set a clear course for the future," he added.
The principal payments are as follows:
- BPXP is to pay the United States a civil penalty of $5.5 billion under the Clean Water Act, payable over 15 years.
- BPXP will pay $7.1 billion to the U.S. and the five Gulf states over 15 years for natural resource damages (NRD). This is in addition to the $1 billion already committed for early restoration. BPXP will also set aside an additional amount of $232 million to be added to the NRD interest payment at the end of the payment period to cover any further natural resource damages that are unknown at the time of the agreement.
- A total of $4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states.
- Up to $1 billion will be paid to resolve claims made by more than 400 local government entities.
"If approved by the court, this settlement would be the largest settlement with a single entity in American history; it would help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife; and it would bring lasting benefits to the Gulf region for generations to come," U.S. Attorney General Loretta Lynch said in a statement.
The news comes as a federal judge was preparing to rule on how much BP owed in federal Clean Water Act penalties. The judge had already found that 3.19 million barrels of oil — nearly 134 million gallons — spilled into the Gulf. Individual states also were pursuing litigation, the AP report explained.
"This is a realistic outcome which provides clarity and certainty for all parties. For BP, this agreement will resolve the largest liabilities remaining from the tragic accident and enable BP to focus on safely delivering the energy the world needs," said Bob Dudley, BP's group chief executive. "For the United States and the Gulf in particular, this agreement will deliver a significant income stream over many years for further restoration of natural resources and for losses related to the spill."