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$18.7B BP Settlement Sets U.S. Record

Friday, July 3, 2015

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WASHINGTON--The largest environmental disaster in U.S. history will yield the nation's largest settlement with a single entity, BP Exploration and Production Inc. has announced.

The UK-based oil giant announced Thursday (July 2) that it would pay more than $18.7 billion to settle hundreds of federal, state and local environmental and economic claims arising from the explosion and sinking of the Deepwater Horizon in the Gulf of Mexico on April 20, 2010.

Eleven crew members on the rig perished, and vanished forever, in the explosion, which set off an 87-day gusher at the bottom of the gulf.

U.S. Coast Guard

Platform supply vessels battle the blaze aboard the Deepwater Horizon in April 2010. Eleven members of the 126-person crew were killed in the disaster. Their bodies were not recovered.

More than 3 million of barrels of oil spilled before the well was capped that July, making the marine disaster the largest of its kind.

'Holding BP Accountable'

Thursday's proposed settlement addresses claims with the federal government and five Gulf states: Alabama, Florida, Louisiana, Mississippi and Texas.

It also includes settlement of claims made by more than 400 local government entities, BP said.

The settlement still requires a public-comment period and court approval in the form of a consent decree. If approved, it will provide funds for the next 15 years to restore the natural resources, economies and communities of the region, the Department of Justice Division of Environmental Crimes reported.

U.S. Attorney General Loretta E. Lynch said in a statement that the Justice Department had been "fully committed to holding BP accountable, to achieving justice for the American people, and to restoring the environment and the economy of the Gulf region at the expense of those responsible, and not the American taxpayer."

DeepwaterDamage LABeachOil
NOAA and Georgia Department of Natural Resources (left); Courtesy Gov. Jindal's office

Dr. Brian Stacy, a veterinarian with the National Oceanic and Atmospheric Administration (NOAA), was part of a team working under a Unified Command on animal rescue and remediation efforts during and after the 87-day oil spill. Right: Thick oil washes ashore in Louisiana in June 2010.

In a process that began with her predecessor, Eric Holder, Lynch said the Justice Department had "fought aggressively in federal court for an outcome that would achieve this mission, proving along the way that BP’s gross negligence resulted in the Deepwater disaster."

Death, Destruction and Damages

Beyond the immediate loss of life and environmental ruin of Gulf waters, marshes and beaches, the spill caused incalculable economic damage to two of the region's key industries: tourism and fishing.

A mountain of lawsuits and fines has piled up since the disaster, with BP reporting continually on its progress in restoring the Gulf. Cleanup and restoration are ongoing, involving more than 240 work plans and billions of dollars in the past five years.

Now, BP says, "the Gulf environment is returning to its baseline conditions."


After five years and billions of dollars invested in hundreds of cleanup plans, BP says "the Gulf environment is returning to its baseline conditions."

Previous fines and settlements totaled nearly $44 billion before Thursday's settlement announcement, BP said.

As recently as February, BP was in U.S. District Court in New Orleans, seeking in vain to have a federal judge cap its fines from the spill at $9.57 million.

Final Chapter

The determination of fines was the third, and final, chapter in the disaster's biggest legal battles. And while the settlement would set a record, it will be manageable for BP.

The payout would be on an 18-year schedule, or about $1.1 billion a year. The settlement would avoid untold years of continuing and uncertain litigation.

And much of the settlement would even be tax deductible for the oil company, analysts also told the Wall Street Journal.


The settlement total includes:

  • A $5.5 billion Clean Water Act penalty, 80 percent of which will be used to fund the Restore Act, which established the Deepwater-specific Gulf Coast Restoration Trust Fund;
  • $8.1 billion in natural resource damages (including $1 billion already committed for early restoration), plus $700 million to respond to damages "unknown at the time of the agreement";
  • $5.9 billlion to settle claims of economic damages by state and local governments; and
  • $600 million for other claims.

3,000 More Cases

The settlement would not end the company's time in court, however. The Wall Street Journal estimates that 3,000 Deepwater-related civil cases are still pending in U.S. and foreign courts.

Those include complaints brought by shareholders, and BP "has yet to set aside money for potential costs," the news outlet said.

U.S. Coast Guard

The mobile offshore drilling unit Q4000 holds position directly over the damaged Deepwater Horizon blowout preventer as crews worked unsuccessfully to plug the wellhead using a technique known as "top kill" in May 2010.

Meanwhile, the Journal reported, BP’s costs from a 2012 civil settlement with Gulf Coast residents and businesses are now estimated at $10.3 billion, up from an initial estimate of $7.8 billion.

The deadline for filing those claims was June 8.

BP: 'A Realistic Outcome'

Still, the company was clearly ready to close this chapter of the 2010 tragedy.

Bob Dudley, BP’s group chief executive, called the proposed 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," he said.

“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.”

Lynch said the proposed agreement "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."


Tagged categories: EMEA (Europe, Middle East and Africa); Explosions; Fatalities; Fire; Government; Health and safety; Laws and litigation; North America; Offshore; Oil and Gas; Program/Project Management

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