BP to settle federal, state Deepwater Horizon claims for $18.7 billion

July 2, 2015
BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon incident and subsequent oil spill with payments over 18 years totaling $18.7 billion.

BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon incident and subsequent oil spill with payments over 18 years totaling $18.7 billion.

The agreements with the US federal government and Alabama, Florida, Louisiana, Mississippi, and Texas also include settlement of claims made by more than 400 local government entities.

“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,” explained Bob Dudley, BP group chief executive. “When concluded, this will resolve not only the Clean Water Act [CWA] proceedings but also the natural resource damage [NRD] claims as well as other claims brought by gulf states and local government entities.”

The principal payments are as follows:

• BP is to pay the US a civil penalty of $5.5 billion under the CWA payable over 15 years. The US District Court for the Eastern District of Louisiana in January ruled under Phase 2 of the MDL 2179 civil trial that 3.19 million bbl of oil were discharged into the Gulf of Mexico during the incident (OGJ Online, Jan. 16, 2015).

• BP will pay $7.1 billion to the US and the five gulf states over 15 years for NRD. This is in addition to the $1 billion already committed for early restoration. BP also will set aside an additional $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.

• As much as $1 billion will be paid to resolve claims made by more than 400 local government entities.

The expected impact of the agreements would be to increase the cumulative pretax charge associated with the Deepwater Horizon incident and spill by about $10 billion from $43.8 billion at the end of the first quarter, BP says.

NRD and CWA payments are scheduled to start 12 months after the agreements becomes final. Total payments for NRD, CWA, and state claims will be made at a rate of $1.1 billion/year for the majority of the payment period.