After five years, BP reached a US$18.7 billion settlement agreement for the Deepwater Horizon disaster that the UK supermajor will pay over an 18-year period.
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Transocean's Deepwater Horizon before the explosion. Image from USEPAGOV. |
The settlement will be paid to federal, state, five Gulf Coast states including Alabama, Florida, Louisiana, Mississippi, and Texas, and more than 400 local government entities. Payments will be made by BP US upstream subsidiary BP Exploration and Production Inc. (BPXP).
The settlement comes less than one week after the US Supreme Court declined to hear BP's Deepwater Horizon appeal. US Independent Anadarko was also a part of that appeal. The Woodlands, Texas-headquartered explorer announced today 2 July, that they are not part of BP's settlement. "We await the Clean Water Act ruling still pending with Judge [Carl] Barbier's court, which has previously found that as a non-operator in the Macondo well, we had no role in the actions and decisions that caused this tragic event," Anadarko stated on its website.
BPXP will pay a $5.5 billion bill to the US under the Clean Water Act, which will be payable over a 15-year period.
The US and five coastal states will receive a payment of $7.1 billion for natural resource damages over a 15-year period. The $7.1 billion is in addition to the $1 billion already committed for early restoration. A total of $232 million will also be added to natural resource damages as an interest payment at the end of the 15-year period to cover any further damages that are unknown at this time, BP said.
In addition, the five coastal states will receive $4.9 billion over an 18-year period to settle economic and other claims made.
The 400+ local government entities will be paid up to $1 billion to resolve claims.
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 1Q. Separately to these agreements, the total charge reported in BP’s 2Q results will also reflect other items including charges for additional business economic loss determinations, BP said.
Payments will begin about one year after the agreements become final, which are subject to the execution of definitive agreements that comprise of a consent decree with the US and Gulf states.
According to BP, the consent decree will be subject to public comment and final court approval.
“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,” Carl-Henric Svanberg, BP chairman said.
“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,” Bob Dudley, BP group chief executive said. “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.
On Monday, the US Supreme Court declined to hear BP and Macondo partner Anadarko Petroleum’s appeal over Deepwater Horizon Clean Water Act fines that kept Louisiana US District Judge Carl Barbier’s initial ruling in good standing. Barbier gave BP the ultimate blame (67% liability) for the disastrous spill that claimed 11 lives and said the UK supermajor showed gross negligence and willful misconduct. BP’s contractors Transocean (30% liability) and Halliburton (3% liability) were also found negligent.
In January, Judge Barbier ruled that BP’s Macondo well discharged 3.19 MMbbl into the Gulf of Mexico, and under the Clean Water Act, the maximum penalty under is $1100/bbl for simple negligence and $4300/bbl for gross negligence or willful misconduct. The court relied on expert testimony to determine the amount of oil that was spilled, since there was not exact way to know.
Read more:
US Supreme Court rejects Deepwater Horizon appeal
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