02 July 2015, News Wires – BP has reached a record-setting agreement with the US federal government and five states that will see the UK supermajor dish out $18.7 billion over the 2010 Gulf of Mexico oil spill.
The deal, which is an agreement in principle, does not, however, include remaining costs from a 2012 class action settlement, or outstanding claims from individuals and businesses who opted out of those settlements.
According to the agreement announced on Thursday, BP is to pay the US a civil penalty of $5.5 billion under the Clean Water Act (CWA), payable over 15 years.
BP will then pay $7.1 billion to the US and the states of Alabama, Florida, Louisiana, Mississippi and Texas – as well as 400 local government entities – for natural resource damages.
That payment, also to be made over 15 years, is in addition to the $1 billion already committed for early restoration work.
The company said it will also set aside an additional amount of $232 million to be added 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 and up to $1 billion will be paid to resolve claims made by more than 400 local government entities,” BP said in a statement.
The US Department of Justice said that, at a total of $18.billion, it is the largest settlement with a single entity in US history.
BP’s shares were up more than 4% at 2:30pm in London on Thursday.
“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,”chief financial officer Brian Gilvary said, adding that the impact on the company’s balance sheet and cash flow would be “manageable”.
Chief executive Bob Dudley called the settlement “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,” Dudley said in a statement.
The settlement will resolve Clean Water Act proceedings, the Natural Resource Damage claims and other claims brought by Gulf States and local government entities, Dudley added.
BP’s Macondo exploration well blew out on 20 April 2010 due to a gas release while drilling with Transocean semi-submersible Deepwater Horizon.
Eleven people were killed in the blast and the rig sank as the well leaked into the US Gulf for nearly three months.
US District Court Judge Carl Barbier ruled in January that a total of 3.19 million barrels spilled – a total less than the US government had claimed.
That opened the door for a spill payment under the Clean Water Act of up to $13.7 billion.
According to the Attorney General on the agreement, Loretta E. Lynch, the next step in the settlement will be 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 with a single entity in American history,” Lynch said.