BP Agrees to Pay $18.7 Billion Deepwater Horizon Settlement
The energy giant announced that its U.S. upstream subsidiary, BP Exploration and Production Inc., has executed the agreements with the U.S. federal government and five Gulf Coast states -- Alabama, Florida, Louisiana, Mississippi, and Texas, adding that they include settlement of claims made by more than 400 local government entities.
BP plc announced July 2 that it has reached agreements in principle to settle all federal and state claims arising from the Deepwater Horizon well blowout, fire, and oil spill in the Gulf of Mexico in 2010. The energy giant announced that its U.S. upstream subsidiary, BP Exploration and Production Inc., has executed the agreements with the U.S. federal government and five Gulf Coast states -- Alabama, Florida, Louisiana, Mississippi, and Texas, adding that they include settlement of claims made by more than 400 local government entities.
U.S. Attorney General Loretta Lynch issued a statement confirming the agreements. "Today, I am pleased to say that 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," she said. "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. I am so very grateful to the Deepwater civil trial team, made up of men and women from the department’s Environment and Natural Resources Division and Civil Division, as well as the incredible response, investigative and supporting efforts of the Departments of Homeland Security, Interior, Commerce and Agriculture and the Environmental Protection Agency, whose efforts have made this important step possible. I also appreciate the extraordinary effort of the many state leaders and environmental professionals who collaborated to advance this agreement in principle."
BP plc's announcement said the principal payments are:
- BP Exploration and Production (BPXP) will 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 United States and the five states over 15 years for natural resource damages; this is in addition to the $1 billion already committed for early restoration. And BPXP will set aside an additional $232 million to be added to the natural resource damage 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 states.
- Up to $1 billion will be paid to resolve claims made by more than 400 local government entities.
The company said the expected impact of these agreements is to increase the cumulative pre-tax charge associated with the Deepwater Horizon incident and spill by around $10 billion beyond the $43.8 billion at the end of BP's first quarter.
"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. The board therefore believes that this agreement is in the best long-term interest of BP and its shareholders. The board set out its position on the dividend at the first quarter and this remains unchanged by the agreement."
Bob Dudley, BP's group chief executive, called it "a realistic outcome which provides clarity and certainty for all parties," adding, "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. When concluded, this will resolve not only the Clean Water Act proceedings, but also the natural resource damage claims as well as other claims brought by Gulf states and local government entities."
The agreements in principle are subject to the execution of definitive agreements in a consent decree with the United States and the states, and this consent decree will be subject to public comment and final court approval, according to the company.