After five years of examination, BP has reached an agreement, to settle all federal and state claims arising from the 2010 Deepwater Horizon accident and oil spill.
BP has recently 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 – Alabama, Florida, Louisiana, Mississippi and Texas – to repay a total of US$18.7 billion. The agreement also includes the claims made by over 400 local government entities.
US$12.6 billion payment to US and the Gulf states
The principal payments which have arisen due to the agreements will be made over extended periods.
BPXP is to pay the US a civil penalty of US$5.5 billion under the Clean Water Act and US$7.1 billion – in addition to the US$1 billion already committed – to the US and the five Gulf states for natural resource damages, both of which are payable over a 15 year period. Moreover, BPXP claims that it will save an additional US$232 million for the natural resource damage payment at the end of the period to cover any further damages that were unknown at the time of the agreement.
US$4.9 billion to settle economic and other claims
A total sum of US$4.9 billion will be paid by BPXP over 18 years to settle economic and other claims made by the five Gulf Coast states. Up to US$1 billion will be used to resolve claims made by more than 400 local government entities.
Payments arising form the natural resource damage and Clean Water Act are scheduled to start 12 months after the agreement is finalised and payments for for these claims will be made at a rate of around US$1.1 billion a year.
BP committed to restoring the Gulf economy and environment
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.”
Bob Dudley, BP’s Group Chief Executive, said: “This is a realistic outcome which provides clarity and certainty for all parties,” and continued: “For the US 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.”
BP’s Chief Financial Officer, Brian Gilvary, said: “The impact of the settlement on our balance sheet and cashflow will be manageable and enables BP to continue to invest in and grow its business, underpinned by a resilient and robust financial framework.”
Adapted form press release by David Bizley