BP Exploration & Production Inc. has reached an agreement that would see it pay up to $18.73 billion to settle all of the remaining Gulf Coast state and federal claims arising from the 2010 blowout of its Macondo well in the Gulf of Mexico and the destruction of the Deepwater Horizon rig.
The amount is said to be the largest environmental settlement involving a single entity in U.S. history. The Deepwater Horizon accident killed 11 rig workers, and the Macondo well spewed oil into the Gulf of Mexico for 87 days.
"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,” said BP CEO Bob Dudley.
"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."
Overall, the amount is composed of:
$8.1 billion for natural resource damages (including $1 billion in early restoration projects);
$232 million to address any unknown natural resource damages;
$5.5 billion for Clean Water Act civil penalties (subject to the RESTORE Act); and
$4.9 billion for state economic losses.
The expected impact of the agreements would be to increase BP’s cumulative pre-tax charge associated with the spill by about $10 billion from $43.8 billion at the end of the first quarter, the company said. Separate from the agreements, the total charge reported in BP's second quarter results will also reflect other items, including charges for additional business economic loss determinations.
Louisiana said it anticipates receiving more than $6.8 billion for claims related to Natural Resource Damages under the Oil Pollution Act of 1990, the state's share of Clean Water Act penalties (under the RESTORE Act), and the state's various economic claims. Upon finalization, the agreement would bring Louisiana's total recovery from the disaster to about $10 billion.
"This agreement is the result of five years of hard-fought litigation and intense scientific research, and it provides Louisiana the coastal restoration and compensation it needs following the Deepwater Horizon disaster," said Louisiana Attorney General James Caldwell. "With a total recovery of more than $10 billion -- which is more than any state has ever recovered for this type of case -- we can begin work to restore and repair Louisiana and its coastline. This agreement lets us focus right away on improving the state without further litigation delays and appeals that could take years."
Louisiana's portion of the settlement is expected to be made up of $5 billion for natural resource damages (including $368 million in previously allocated early restoration); a minimum of $787 million for Clean Water Act civil penalties distributed through the RESTORE Act, and $1 billion for state economic damages.
"This agreement in principle combined with prior Deepwater Horizon related settlements translates into approximately $8.7 billion for coastal restoration. These funds will allow the state to move forward with identifying and implementing projects that will restore our unique and incredibly productive ecosystem," said Kyle Graham, executive director of the Louisiana Coastal Protection and Restoration Authority.
Texas is slated to receive more than $750 million from the settlement, said Gov. Greg Abbott. "After five years, I'm proud to announce that Texas, along with the other Gulf states, has reached an agreement in principle with BP to resolve all the states' claims," he said." This settlement will allow Texas to reinvest in the Gulf community and reinvigorate the economic and environmental health of the region."
Mississippi said it expects to receive from the settlement about $1.5 billion over the next 17 years. Combined with $659 million in early funding, Mississippi is expected to receive a total of nearly $2.2 billion in compensation.
"Mississippi suffered tragic losses as a result of the BP oil spill. Eleven men died, including four Mississippians." Gov. Phil Bryant said. "For months, we battled to protect our shorelines and the unique ecosystems and natural resources of our beautiful Gulf Coast from millions of gallons of oil and chemicals."
The state is expected to receive about $183 million in Natural Resource Damage Assessment payments and about $582 million in Clean Water Act penalties under the RESTORE Act. Mississippi will also receive $750 million in economic damages. "Our office recovered about seven times more than the initial projections for economic damages," said Mississippi Attorney General Jim Hood. "We worked well with other states and all of the cities and counties on our coast to build an outstanding economic damages model."
Alabama Attorney General Luther Strange said his state is expected to receive $1 billion in economic damages and about $1 billion in natural resource damages and federal penalty monies.
Florida Attorney General Pam Bondi said her state stands to receive more than $3.25 billion. The state would receive $2 billion for its economic loss claims, the most of all five coastal states. Florida would also receive more than $1.25 billion from the natural resource damage claims and through the provisions of the RESTORE Act.
The agreement is expected to be settled over the next several months. Court approval of a final consent decree is expected to be sought early next year.
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 claims. They also do not cover claims by individuals and businesses that opted out of the 2012 settlements and/or whose claims were excluded from them. BP said will continue to defend those claims. The latest agreements in principle also do not resolve private securities litigation that is pending.
Last month the U.S. Supreme Court rejected an appeal by BP and Macondo minority partner Anadarko Petroleum Corp. over federal water fines related to the spill. The justices let stand a federal appeals court ruling issued in January that the owners of the Macondo well could not avoid Clean Water Act fines by blaming failed equipment owned by Transocean Ltd., which owned and operated the Deepwater Horizon rig (see Daily GPI, June 29).