Climate

After Years Of Litigation, BP Agrees To $18.7 Billion In Claims And Penalties For Historic Oil Spill

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In simultaneous press conferences in Alabama, Louisiana, Mississippi, and Florida, the attorneys general of the states most directly impacted by the massive 2010 BP spill announced a “global deal” to settle years of litigation with the oil giant for a total of $18.7 billion.

The settlement, largely split between the five Gulf Coast states, includes $6.8 billion to Louisiana, $3.25 billion to Florida, $2.3 billion to Alabama, $2.2 billion to Mississippi, $750 million to Texas, and $5.5 billion in Clean Water Act penalties.

“Today, I am pleased to say that after productive discussions with BP over the previous several weeks, we have reached an agreement in principle that would justly and comprehensively address outstanding federal and state claims, including Clean Water Act civil penalties and natural resource damages,” U.S. Attorney General Loretta Lynch said in a statement. “BP is also resolving significant economic claims with the impacted state and local governments.”

Lynch said the agreement in principle would be worked into a consent decree, which would then undergo a public comment period.

“If approved by the court,” she said, “this settlement would be the largest settlement with a single entity in American history.”

Louisiana Attorney General Caldwell called the agreement a “game changer” — “the largest environmental settlement in history.” Gov. Robert Bentley (R-AL) called it a “landmark agreement.”

Calling April 20, 2010 “a day Alabamians will never forget,” Gov. Bentley described the enormous impact the spill had on tourism, coastal businesses, and public health before providing more details about the settlement.

“The BP/ Deepwater Horizon oil spill was the worst environmental disaster in United States history, and the impact to the Alabama Gulf Coast was detrimental,” he said.

Bentley was the only governor to attend his state’s press conference announcing the Gulf States settlement, calling it a “significant step forward,” that would help Alabama “become a stronger, safer and more resilient state as a result of this terrible disaster.” He also thanked BP for coming to the table and “settling this in a fair way.”

Last year, BP’s lawyers fought all the way to the Supreme Court to cap the amount of Gulf oil spill-related fines it must pay at $12 billion, almost a third less than the amount U.S. prosecutors sought.

The Supreme Court refused to hear their case, confirming a District Court judge’s finding of “gross negligence,” which triggers the maximum permissible fine — up to $18 billion.

A federal judge was preparing to announce how much the company owed in Clean Water Act penalties because of the damage the spill caused to the environment. The settlement goes to resolve those penalties as well as claims involving natural resource damage and local government economic damage. It will also settle state economic claims.

This does not include cleanup costs BP has already incurred, nor a separate settlement with businesses and individuals over spill-related losses. The Wall Street Journal estimates that, combined with Thursday’s announced settlement, BP will have paid $53.8 billion as a result of the spill.

However, the damage caused by the spill could actually be larger than what is reflected in the settlement.

“$18.7 billion may sound like a lot of money, and it is, but it pales in comparison to what BP owes,” said Jacqueline Savitz, vice president of Oceana. “The Clean Water Act violations should have amounted to $13.7 billion alone, due to the company’s gross negligence and the sheer amount of oil they spilled. And that’s using conservative estimates.”

Savitz noted that under the Oil Pollution Act, BP has to pay for the natural resources the spill destroyed.

“The exact amount is still being worked out by NOAA, but based on the amounts paid for a much smaller spill, the Exxon Valdez Oil Spill, these damages could be in the $30 billion range,” she said. “Even if it’s a smaller amount, it’s certainly a lot more than the $7.1 billion they are proposing to pay in this settlement.”

Put another way, the $18.7 billion settlement is comprised of $5.5 billion in Clean Water Act penalties, $7.1 billion in natural resource damages, and $4.9 billion in economic damages. The state settlements will be paid out over the next 18 years, while federal penalties will be paid over the next 15 years.

Louisiana’s share, $6.8 billion, is the largest of all the affected states. It includes $5 billion for natural resource damages, at least $787 million in Clean Water Act civil penalties, and $1 billion in state economic damages. Gov. Bobby Jindal has been facing a $1.6 billion state budget shortfall.


Alabama’s settlement will be split, with $1.3 billion going to environmental projects, and $1 billion going to the state’s general fund. Attorney General Luther Strange said it would “return the state’s finances to where they would have been, and should have been,” prior to the spill.

Mississippi will receive an additional $1.5 billion, split between environmental and economic damage compensation, in addition to $659 million in early funding.

Florida’s $3.25 billion share is mostly for economic damages ($2 billion) and the rest, $1.25 billion, from their natural resource damage claims. State Attorney General Pam Bondi said the settlement avoids going down a “black hole” of litigation.

The spill, which occurred deep below the Gulf of Mexico 100 miles offshore, released 4.9 million barrels of oil from the Macondo well and resulted in a fiery explosion that killed 11 people on the Deepwater Horizon drilling rig.

This agreement settles all federal and state claims, as well as over 400 local government claims.