British energy giant BP announced July 2 it has reached a tentative settlement with the U.S. government and five states along the Gulf of Mexico coast to pay at least $18.7 billion for the 2010 Deepwater Horizon oil spill, the worst such disaster in American history.
Under the proposed settlement, BP Exploration and Production, a U.S. subsidiary, will pay at least $7.1 billion to the federal government as well as to Alabama, Florida, Louisiana, Mississippi and Texas for environmental damages. The states also will get $4.9 billion to offset economic damages, and up to $1 billion more will go to the governments of more than 400 localities that suffered similar losses.
Already BP has agreed to pay criminal fines totaling more than $4 billion stemming from explosion on the oil rig off the Louisiana coast on April 20, 2010 killed 11 workers. The accident caused the structure to sink and started a spill from the sea floor that spewed an estimated 3.2 million barrels of crude oil into the Gulf. Related: Oil Faces Steep Downside Risk From China’s Stock Market
The well didn’t stop gushing oil until July 15, and by then BP already had spent $14 billion working to stop the spill. All told, BP has said the disaster will cost the company more than $40 billion. As for the settlement announced on July 2, BP estimated it at $18.7 billion, a figure similar to estimates made by the affected states. The Justice Department said the amount could exceed $20 billion. The largest payments will be paid over periods ranging from 15 to 18 years.
The settlement still must be the subject of forums for public comment as well as approval by the U.S. District Court in New Orleans, but Attorney General Loretta Lynch indicated in a statement that she believed the deal will be closed, saying the propsalproposal “would justly and comprehensively address outstanding federal and state claims.” Related: How Greece Crisis Could Drag Oil Prices Down
“If approved by the court, this settlement 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,” she said.
BP also praised the tentative deal. Carl-Henric Svanberg, its chairman, said the proposed deal would open “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.” And he said BP’s board felt the agreement was “in the best long-term interest of BP and its shareholders”.
The company’s CEO, Bob Dudley, praised the “clarity and certainty” of the agreement. “For BP, this agreement will resolve the largest liabilities remaining from the tragic accident,” he said. “For the U.S. 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.” Related: Top Shale Takeover Targets
The deal also appeared to please local public officials. Gov. Bobby Jindal of Louisiana, the state that may have suffered the most from the spill, said, “This agreement will not only restore the damage inflicted on our coastal resources by the Deepwater Horizon oil spill, it will also allow Louisiana to continue aggressively fighting coastal erosion.”
And Alabama Gov. Robert Bently, at a news conference in Montgomery, described the settlement as a “landmark. … It is designed to compensate the state for all the damages, both environmental and economic.”
By Andy Tully Of Oilprice.com
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