Gulf Spill Will Cost BP $18.7 Billion
Oil company agrees to largest civil settlement with one company in U.S. history
NEW ORLEANS -- Following what U.S. Attorney General Loretta Lynch described as “productive discussions” leading to what BP CEO Bob Dudley called “a realistic outcome,” BP has reached an agreement with the U.S. Department of Justice, attorneys general of several states and others to settle federal, state and local Deepwater Horizon oil spill claims for up to $18.7 billion, with payments to be spread over 18 years.
On April 20, 2010, a fire and explosion and the sinking of the Transocean Deepwater Horizon drilling rig 130 miles southeast of New Orleans resulted in the deaths of 11 of the 126 crew members and led to the BP Macondo oil well rupture, triggering the largest U.S. offshore oil spill in history.
As reported in a 21st Century Smoke/CSP Daily News Flash, BP’s U.S. upstream subsidiary BP Exploration & Production Inc. (BPXP) will pay the United States a civil penalty of $5.5 billion under the Clean Water Act (CWA), payable over 15 years.
It will pay $7.1 billion to the United States and the five Gulf states—Alabama, Florida, Louisiana, Mississippi and Texas—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.
BPXP will pay a total of $4.9 billion over 18 years to settle economic and other claims made by the five Gulf Coast states.
And up to $1 billion will be paid to resolve claims made by more than 400 local government entities.
Click here to view the payment schedule and other details of the proposed settlement.
“After productive discussions with BP over the previous several weeks, we have reached an agreement in principle that would justly and comprehensively address outstanding federal and state claims, including Clean Water Act civil penalties and natural resource damages,” U.S. Attorney General Loretta Lynch. “BP is also resolving significant economic claims with the impacted state and local governments. We will work diligently during the next several months to incorporate the agreement in principle into a consent decree, which would then undergo public comment before court approval. 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.”
Bob Dudley, BP’s group CEO, said: “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. 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.”
BP’s CFO, Brian Gilvary, added, “The negotiations were carried out with the goal of reaching a collective solution that would be acceptable for all parties. For BP this will provide certainty with respect to BP’s financial obligations for the matters settled, particularly with the ability to spread payments smoothly over many years. The impact of the settlement on our balance sheet and cashflow will be manageable and enables BP to continue to invest in and grow its business, underpinned by a resilient and robust financial framework.”