BP Oil Spill Settlement Tops $20BN

 BP will have to pay up to $20.8bn penalties and compensation over the next 16 years under a final settlement agreement filed today for the 2010 US Gulf of Mexico oil spill.

The settlement will end federal and state government litigation against BP for its role in the deadly Macondo well blowout and oil spill, which killed 11 rig workers, released an estimated 3.18mn bls of crude into the gulf and fouled at least 1,300 miles (2,092km) of shoreline. The settlement will resolve claims under the Clean Water Act and also pay for natural resources damages and economic losses linked to the spill.

The Justice Department and the five Gulf coast states filed their settlement today in court, about three months after BP announced it reached a draft settlement valued at $18.7bn. The penalties in that settlement remain the same, but the US government included in its final settlement amounts the $1bn that BP already paid on early restoration efforts and up to $1bn in compensation to local governments for economic losses.

BP said today's filing brought it "another step closer" to finalizing the settlement it announced on 2 July, provide it with certainty about its financial obligations and allow it to focus on "safely delivering the energy the world needs."

BP had faced a maximum of more than $13bn in penalties under the Clean Water Act, after a federal judge found last year that the company had been grossly negligent in its conduct leading up to the spill. Under the settlement filed today BP will only pay $5.5bn in Clean Water Act penalties that will be spread out between late 2017-2031.

Although the penalty is less than the statutory maximum, US attorney general Loretta Lynch said it would offer finality for states and avoid the delays and uncertainty caused by potential appeals. Louisiana, Texas, Florida, Alabama and Mississippi will receive about 80pc of the Clean Water Act penalties payments.

"BP is receiving the punishment it deserves, while also providing critical compensation for the injuries it caused to the environment and the economy of the gulf region," Lynch said.

The settlement also includes $7.1bn in penalties for natural resources damages, along with $4.9bn in payments to the five gulf coast states for economic loss claims. BP will also have to pay $600mn in other fines and up to $700mn for potential natural resources damages discovered in the future. The company will not be allowed to take tax deductions for its penalties.

The US Environmental Protection Agency (EPA) and other agencies involved in the government response to the oil spill today proposed how to spend an estimated $8.8bn on environmental restoration in the gulf. Nearly half of that amount would go toward wetlands restoration, with other payments to replenish and protect sea turtles, marine mammals, fish, oysters and birds.

"No amount of money can erase the fear and the loss they endured, but it can help them to recover and rebuild," said EPA administrator Gina McCarthy today.

The settlement agreement will be open for public comment for 60 days.

Source: Argus Media
Date: Oct 6, 2015