Five years on from the Deepwater Horizon oil catastrophe in 2010, BP has today reached agreement in principle to settle all US federal and state government claims arising from the Gulf of Mexico blow-out.
Its US arm – BP Exploration and Production – will pay out a total of $18.7 billion over the next 18 years. This brings the overall costs of the major oil leak to BP to $43.8 billion.
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. Included in the overall pay-outs are the following penalties:
- 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.
The expected impact of these agreements would be to increase the cumulative pre-tax charge associated with the Deepwater Horizon accident and spill by around $10 billion from $43.8 billion at the end of the first quarter.
Carl-Henric Svanberg, BP 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 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.”