The price for resolving this litigation (a consent decree with the federal government and officials in Florida, Alabama, Mississippi, Louisiana, and Texas): $18.7 billion.
Included in the settlement is a record $5.5 billion fine to cover federal penalties under the Clean Water Act. The previous high-water mark for such fines was $1 billion.
The deal comes as a New Orleans-based federal court was still weighing pollution fines under the Clean Water Act against BP. It had already made two key rulings: that BP acted with “gross negligence” in the rig explosion and that almost 34 million gallons has spilled into the Gulf as a result of that negligence. BP had appealed both those rulings, which set the stage for a possible multibillion-dollar Clean Water Act penalty, so the pressure was on BP to cut the best deal that it could.
The fallout from the Deepwater Horizon/Macondo well disaster has been financially painful for the global oil company.
BP claims to have spent at least $28 billion to date on response, cleanup, and compensation, and has set aside $43.8 billion for all contingencies related to the spill.
In addition to the US civil penalty of $5.5 billion under the Clean Water Act, payable over 15 years, the company has agreed to the following:
• To pay the US government and five Gulf States $7.1 billion over 15 years for natural resources damages (in addition to the $1 billion it has already committed).
• To pay $4.9 billion over a period of 18 years to settle economic and other claims made by the five Gulf Coast states.
• To pay up to $1 billion to resolve claims made by more than 400 local government bodies.
BP chief executive Bob Dudley is putting a brave face on the outcome: “This is a realistic outcome which provides clarity and certainty for all parties.”
However, the agreements do not cover the remaining costs of the 2012 class-action settlements with the Plaintiffs’ Steering Committee for economic and property damage and medical costs. Nor does it not cover claims by individuals and businesses that opted out of the 2012 settlements and/or whose claims were excluded from them. BP plans to continue to vigorously defend itself against those claims.
British editorial veteran Stuart Hampton has been covering oil and gas companies for Hoover’s since the Neogene-Quaternary period. Well, actually, since the early 1990s. For the best overview of the oil industry and its history he recommends Daniel Yergin’s “The Prize.” You can also follow Stuart on Twitter.
Image courtesy of the US Coast Guard.