BP Plc will pay up to $18.7 billion in penalties to the U.S. government and five states to resolve nearly all claims from its deadly Gulf of Mexico oil spill five years ago in the largest corporate settlement in U.S. history.
The agreement adds to the $43.8 billion that BP had previously set aside for criminal and civil penalties and cleanup costs. The company said its total pre-tax charge for the spill now stands at $53.8 billion.
Under the agreement with the U.S. Department of Justice and the states, BP will pay at least $12.8 billion for Clean Water Act fines and natural resource damages, plus $4.9 billion to states. The payouts will be staggered over as many as 18 years. The preliminary settlement, subject to all sorts of variables, avoids a substantial amount of further litigation.
The rig explosion on April 20, 2010, the worst offshore oil disaster in U.S. history, killed 11 workers and spewed millions of barrels of oil onto the shorelines of several states for nearly three months.
The agreement, which still needs to be approved by courts, covers Clean Water Act fines and natural resources damages, along with claims by Alabama, Florida, Louisiana, Mississippi and Texas as well as 400 local government entities.
"This is a realistic outcome which provides clarity and certainty for all parties," BP Chief Executive Officer Bob Dudley said in a statement. "For BP, this agreement will resolve the largest liabilities remaining from the tragic accident."
The size of the settlement was slightly more than the $17.6 billion that investors had initially feared BP would be fined for gross negligence under the Clean Water Act alone.
U.S. District Court Judge Carl Barbier, who has overseen the case, was expected to rule on that issue later this year. Even then, BP would have faced years of lawsuits to address claims by states and by the federal government under a natural resource damage assessment.
The settlement announced Thursday closes off those remaining liabilities.
It was not immediately clear how BP will fund the settlement. BP has shed billions in assets to pay for the spill, eroding about one-fifth of the earnings base it had before 2010.
PHOTO: Fire boat response crews battle the blazing remnants of the offshore oil rig Deepwater Horizon, off Louisiana, in this April 21, 2010 file handout image.
CREDIT: REUTERS/U.S. COAST GUARD/FILES/HANDOUT.