BP has announced that it is to pay $18,7-billion (R233,75-billion) in settlements for all Federal, state and local claims arising from the Gulf of Mexico oil spill which occurred in 2010. The spill, caused by an explosion on board the Deepwater Horizon oil rig, resulted in 11 dead and spread millions of gallons of oil into the Gulf of Mexico.
Five years on from the incident, BP has reached agreements in principle to settle all federal and state claims arising from the event. BP announced that its US Upstream subsidiary, BP Exploration and Production Inc (BPXP), has executed the agreements with the US federal government and five Gulf Coast states. The agreement with the states of Alabama, Florida, Louisiana, Mississippi and Texas also includes settlement of claims made by more than 400 local government entities. The principal payments are as follows:
- BPXP is to pay the United States a civil penalty of $5.5 billion under the Clean Water Act (CWA) – payable over 15 years.
- BPXP will pay $7.1-billion to the United States and the five Gulf states over 15 years for natural resource damages (NRD). This is in addition to the $1 billion already committed for early restoration. BPXP 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.
- A total of $4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states.
- Up to $1-billion will be paid to resolve claims made by more than 400 local government entities.
Carl-Henric Svanberg, BP’s chairman, said: “Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise. 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.
“In deciding to follow this path, the Board has balanced the risks, timing and consequences associated with many years of litigation against its wish for the company to be able to set a clear course for the future.
“The Board therefore believes that this agreement is in the best long-term interest of BP and its shareholders. The Board set out its position on the dividend at the first quarter and this remains unchanged by the agreement.”
Bob Dudley, BP’s group chief executive, said: “This is 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.
“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.”
The agreements in principle are subject to execution of definitive agreements. These will comprise a Consent Decree with the United States and Gulf states with respect to the civil penalty and natural resource damages, a settlement agreement with five Gulf states with respect to State and local claims for economic and property losses, and release agreements with local government entities.
The Consent Decree will be subject to public comment and final court approval. The Consent Decree and settlement agreement with the Gulf states are conditional upon each other and neither will become effective unless (1) there is final court approval for the Consent Decree and (2) local government entities execute releases to BP’s satisfaction.