BP To Pay $18.7B Deepwater Horizon Oil Spill Settlement

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Late last week, the largest global settlement in U.S. history was reached by BP Exploration & Production Inc., $18.7 billion, to put to rest claims against it in the 2010 Deepwater Horizon oil spill.

Under the terms of the settlement, BP will pay various federal agencies and Gulf states a total of $18.7 billion over the next 15 years. The settlement comes after the U.S. Supreme Court refused to reconsider BP’s liability in the environmental and economic disaster. According to reports, this agreement will resolve the federal government and state claims as well as claims from more than 400 local government entities affected by the oil spill.

A statement released by Carl-Henric Svanberg, BP’s chairman, the deal will put to rest any major remaining legal exposures, provide clarity on costs and create a certainty of payment for all parties involved. “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,” said the chairman.

BPXP, the company’s upstream subsidiary, will pay a $5.5 billion Clean Water Act civil penalty over the next 15 years to the federal government, apparently the largest civil penalty in the history of environmental law according to the Justice Department. Eighty percent of the penalty will go to restoration efforts in the states affected by the spill per the Resources and Ecosystems Sustainability, Tourist Opportunities and Revived Economies of the Gulf Coast States Act. Further, $7.1 billion will be paid by BPXP to the United States and the five Gulf states over 15 years for natural resource damages. According to reports, $232 million will be reserved for the end of the 15 years to cover any unknown natural resource damages.

Five Gulf Coast states will be paid a total of $4.9 billion over 18 years to settle economic and other claims and local governments will receive up to $1 billion. Louisiana will receive $6.8 billion, Florida $3.25 billion, Alabama $2 billion, Mississippi $1.5 billion, and Texas $788 million, according to each state’s attorney general.

This present BP oil spill settlement agreement does not cover the remaining costs of a 2012 class action settlement agreement with the plaintiffs’ steering committee for economic and property damage and medical claims. Additionally, for individuals and businesses that opted out of that settlements or those whose claims were excluded from them will also not be affected by the present settlement. Private securities litigation pending in multidistrict litigation will also remain according to the oil company.

“Since the Deepwater Horizon oil spill — the largest environmental disaster in our nation’s history — the Justice Department has been fully committed to holding BP accountable, to achieving justice for the American people and to restoring the environment and the economy of the Gulf region at the expense of those responsible and not the American taxpayer,” said the U.S. Attorney General, noting that this is the largest global settlement amount in U.S. history.

In December, the U.S. Supreme Court let stand a 2012 decision that found BP and Anadarko Petroleum Corp. liable for Clean Water Act violations stemming from the well failure that caused the largest oil spill in U.S. history as well as findings that BP had acted with gross negligence.

According to the company, a consent decree with the United States and Gulf states with respect to the civil penalty and natural resource damages will follow, as well as a settlement agreement with five Gulf states with respect to state and local claims for economic and property losses, and release agreements with local government entities.

The oil company pleaded guilty in November 2012 to 11 felony manslaughter charges, environmental crimes, and obstruction of Congress and was sentenced to pay $4 billion in criminal fines and penalties, restitution and community service. Additionally, a $9.2 billion settlement was approved for a class that alleged economic and property damages in December of that year.

The Deepwater Horizon Oil Spill Class Action Lawsuit is BP Exploration & Production Inc., et al. v. Lake Eugenie Land & Development Inc., et al., Case No. 14-123, in the U.S. Supreme Court.