BP will pay $US18.7 billion for the Deepwater Horizon oil spill

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This was published 8 years ago

BP will pay $US18.7 billion for the Deepwater Horizon oil spill

By Ellen Nakashima
Updated

The US Justice Department has reached an $18.7 ($24.5) billion agreement with BP to settle civil claims arising from the 2010 Deepwater Horizon oil spill in the Gulf of Mexico – the worst oil spill in US history.

The agreement comes five years and 73 days after the blowout in 2.6-kilometre-deep water led to an explosion aboard the Deepwater Horizon that killed 11 people and immolated the giant rig. There had never been a blowout at such depths, and initial efforts to shut in the well failed.

"If approved by the court, this settlement would be the largest settlement with a single entity in American history," Attorney General Loretta Lynch said. "It would help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife. And it would bring lasting benefits to the Gulf region for generations to come."

The rig sank on April 22, 2010, coming to rest upside down on the muddy floor of the Gulf about 500 metres from the wellhead. The Macondo well continued to gush for a total of 87 days, polluting the gulf with millions of barrels of oil – the precise amount became the focus of furious legal battling – before it could be capped by new hardware and shut in.

The Deepwater Horizon rig explosion killed 11 workers on April 20, 2010 and spilled 3.19 million barrels of oil for nearly three months into the Gulf of Mexico.

The Deepwater Horizon rig explosion killed 11 workers on April 20, 2010 and spilled 3.19 million barrels of oil for nearly three months into the Gulf of Mexico.

The legal repercussions have been lengthy and complicated. The agreement addresses the most critical unresolved issue: How much BP must pay in Clean Water Act fines.

According to the agreement, BP will pay $US5.5 billion ($7.21 billion) in Clean Water Act penalties, 80 per cent of which will go to restoration efforts in the five affected Gulf states: Alabama, Florida, Louisiana, Mississippi and Texas. It will also pay $US8.1 billion ($10.61 billion) in natural resource damages and an additional $US700 million ($917 million) to respond to environmental damages unknown at the time of the agreement.

BP has also agreed to pay $US5.9 billion ($7.73 billion) to settle claims by state and local governments for economic damages suffered as a result of the spill, and a total of $US600 million ($786) for other claims, including for reimbursement of damage assessment costs.

"This is a landmark settlement," Alabama Governor Robert Bentley of Alabama said. "It is designed to compensate the state for all the damages, both environmental and economic."

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Environmental disaster ... A decomposed fish lies in the water as workers pick up oil balls from the Deepwater Horizon oil spill in Waveland, Mississippi in 2010.

Environmental disaster ... A decomposed fish lies in the water as workers pick up oil balls from the Deepwater Horizon oil spill in Waveland, Mississippi in 2010.Credit: Reuters

Timeline of BP damages

* April 20, 2010. Rig explodes: An explosion on the Deepwater Horizon oil rig at the Macondo exploration well kills 11 workers and releases millions of barrels of crude oil into the Gulf of Mexico. The well is capped in mid-July. BP ultimately sets aside $US42 billion ($55.06 billion) to pay for clean-up costs, damages and penalties.

BP's recent strategy change for its downstream assets in Australia and New Zealand has prompted the cuts.

BP's recent strategy change for its downstream assets in Australia and New Zealand has prompted the cuts.Credit: Getty-Images

* November 2012. Criminal case settled: BP agrees to pay $US4.5 billion ($5.9 billion) in fines and other penalties and pleads guilty to 14 criminal charges. The US government bans BP from new federal contracts, imperiling the company's role as a top US offshore oil producer and No. 1 military fuel supplier. Separately, the US Department of Justice files criminal charges against three BP employees in connection with the accident.

* December 2012. Class action settled: US District Judge Carl Barbier gives final approval to BP's settlement with individuals and businesses claiming to have lost money and property because of the spill. BP initially estimates it will pay $US7.8 billion ($10.23 billion) to settle more than 100,000 claims, but the dollar amount is not capped. The company later says the payout may grow substantially, in part because of payouts to many claimants who suffered no harm, and files numerous legal challenges to the agreement.

In this July 31, 2010 picture, Harold Cline, left, vacuums oil from the Deepwater Horizon spill that washed up in a cove in Barataria Bay on the coast of Louisiana.

In this July 31, 2010 picture, Harold Cline, left, vacuums oil from the Deepwater Horizon spill that washed up in a cove in Barataria Bay on the coast of Louisiana.Credit: AP

* February 2013. Civil trial begins: Officials from the federal government and several US states begin facing BP in court at a three-phase civil trial over how blame should be apportioned between BP, Transocean, which owned the drilling rig, and Halliburton, which did cement work. Government lawyers urge Barbier to find BP grossly negligent, which could roughly quadruple the amount of fines under the US Clean Water Act.

* September 4, 2014. Judge finds BP bears most of the blame: Barbier finds BP "grossly negligent" for its role in the oil spill. He assigns 67 per cent of the fault to BP, 30 per cent to Transocean and 3 per cent to Halliburton. BP pledges to appeal.

A June 2010 photo of a dam built to protect Grand Island's beaches on the Louisiana coast from oil that washes ashore from the Deepwater Horizon oil rig explosion and spill in the Gulf of Mexico.

A June 2010 photo of a dam built to protect Grand Island's beaches on the Louisiana coast from oil that washes ashore from the Deepwater Horizon oil rig explosion and spill in the Gulf of Mexico. Credit: AP

* January 15, 2015. Size ruling: Barbier determines that 3.19 million barrels of oil spilled. The amount would be used to calculate damages.

* February 24, 2015. Size appeal: BP appeals judge's ruling on size of the oil spill.

The crew of a Basler BT-67 fixed wing aircraft release oil dispersant over an oil discharge from the mobile offshore drilling unit, Deepwater Horizon, off the shore of Louisiana, in this May 5, 2010 photo.

The crew of a Basler BT-67 fixed wing aircraft release oil dispersant over an oil discharge from the mobile offshore drilling unit, Deepwater Horizon, off the shore of Louisiana, in this May 5, 2010 photo.Credit: Reuters

* July 2, 2015. Settlement reached: BP agreed to pay about $US18.7 billion in damages for water pollution caused by the spill, settling claims with the US government and Louisiana, Mississippi, Alabama, Texas and Florida. It is the largest settlement with a single entity in US history, the US Department of Justice said.

Washington Post, New York Times, Reuters

BP posted a record loss of $US6.5 billion last year, reflecting oil's biggest slump in a generation as well as a $US10 billion provision for the legal settlement relating to its Gulf of Mexico oil disaster.

BP posted a record loss of $US6.5 billion last year, reflecting oil's biggest slump in a generation as well as a $US10 billion provision for the legal settlement relating to its Gulf of Mexico oil disaster.Credit: AP

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