BP has reached a settlement with the U.S. government and five states to settle a damages claim from the 2010 Gulf of Mexico oil spill, which will see it pay up to $18.7 billion spread over a period of 18 years.
Mirroring the latest announcement, shares of BP rose 4%, gaining 20 pence to trade at 439 pence in early afternoon trading in London.
BP’s $18.7 billion settlement
In terms of settlement unveiled Thursday, officials in Florida, Alabama, Mississippi and Louisiana announced an $18.7 billion settlement with BP that resolves years of litigation over the 2010 Gulf of Mexico oil spill.
The latest settlement announcement comes as a federal judge was preparing to rule on how much BP owed in federal Clean Water Act penalties after millions of gallons of oil spewed into the Gulf.
The settlement envisages BP’s U.S. subsidiary to pay the United States a civil penalty of $5.5 billion under the Clean Water Act, payable over 15 years. BP will also pay $7.1 billion to the U.S. and the five Gulf states over 15 years for natural resource damages (NRD). This would be on top of $1 billion already committed for early restoration.
Moreover, the U.S. subsidiary – BP Exploration and Production – will also set aside an additional amount of $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.
The terms of settlement also envisages a total of $4.9 billion to be paid over 18 years to settle economic and other claims made by the five Gulf Coast states. In addition, up to $1 billion will be paid to resolve claims made by over 400 local government entities.
Terming the latest settlement as “landmark”, Gov. Robert Bentley of Alabama said: “It is designed to compensate the state for all the damages, both environmental and economic”.
Reacting to the settlement, BP Chairman Carl-Henric Svanberg said: “Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise”. He added: “We have made significant progress, and with this agreement we provide a path to closure for BP and the Gulf. It resolves the company’s largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved”.
As reported by ValueWalk last month, the U.S. Supreme Court refused to hear an appeal from oil majors BP and Anadarko Petroleum, leaving intact a lower court ruling that makes the firms potentially liable for billions of dollars in fines for the disastrous oil spill in the Gulf of Mexico in 2010.