BP Oil Spill Settlement Finalized, Rises to More Than $20B
The value of BP Plc’s settlement with the U.S. government and five Gulf states over the Deepwater Horizon oil spill rose to $20.8 billion in the latest tally of costs from the U.S. Department of Justice.
The settlement is the largest in the department’s history and resolves the government’s civil claims under the Clean Water Act and Oil Pollution Act, as well as economic damage claims from regional authorities, according to a U.S. Justice Department statement Monday.
The pact is designed “to not only compensate for the damages and provide for a way forward for the health and safety of the Gulf, but let other companies know they are going to be responsible for the harm that occurs should accidents like this happen in the future,” U.S. Attorney General Loretta Lynch told reporters at a briefing in Washington.
BP’s total settlement cost of $18.7 billion announced in July didn’t include some reimbursements, interest payments and committed expenditures for early restoration of damages to natural resources. The London-based company has set aside a total of $53.7 billion to pay for the disaster in 2010, when an explosion on the Deepwater Horizon drilling rig in the Gulf of Mexico resulted in the largest offshore oil spill in U.S. history.
The announcement Monday includes $700 million for injuries and losses related to the spill that aren’t yet known, $232 million of which was announced earlier. It also adds $350 million for the reimbursement of assessment costs and $250 million related to the cost of responding to the spill, lost royalties and to resolve a False Claims Act investigation, according to a consent decree filed by the Justice Department at the U.S. District Court in New Orleans.
“This pretty much puts a final stamp on the settlement and the pain of the past five years can come to an end,” said Iain Armstrong, a London-based oil sector analyst at Brewin Dolphin Ltd.
The consent decree will become final only after completion of a public-comment period of at least 60 days, according to the documents. The accord gives the U.S. and the states the right to back out or withhold support from the deal “if comments received during the public comment procedure disclose facts or considerations indicating that the proposed consent decree or any of its terms is inappropriate, improper or inadequate.”
“Today we are another step closer to finalizing the settlement we announced on July 2, fulfilling our commitment to help restore the Gulf economy and environment,” BP said in an e- mailed statement.
The U.S. government filing does not reflect a new settlement or any new payments and covers the same details disclosed by BP in July, the company said. BP’s payments will include $5.5 billion of federal penalties under the U.S. Clean Water Act — the highest ever for that law — as well as $7.1 billion for natural resource damages claims by the five Gulf states, $4.9 billion to the states for economic claims and $1 billion to local governments in the area.
The company agreed to pay the natural resource claims over 18 years and the others over 15 years.
The Deepwater Horizon drilling rig exploded and sank in the Gulf of Mexico in April 2010. Eleven men died aboard the rig and oil gushed from the site for weeks before the well was capped. The accident sparked thousands of lawsuits against BP and its contractors, Transocean Ltd., the rig owner, and Halliburton Co., which provided cementing services for the project. BP has shed billions of dollars of assets to pay for the accident and lost more than a third of its market value.
(With assistance from Laurel Calkins in Houson.)