Article source: BP press release.

BP announced July 2, 2015 that its United States Upstream subsidiary, BP Exploration and Production Inc (BPXP), has executed agreements with the U.S. federal government and five U.S. Gulf Coast states to resolve claims made by federal, state, and more than 400 local government entities. In the agreement, BP has committed to paying up to US$ 18.7 billion spread over 18 years.

Settlement Terms

Terms of the proposed agreement are as follows:

• Clean Water Act (CWA) civil penalty - US$ 5.5 billion over 15 years.
• Natural Resource Damages (NRD) - US$ 7.1 billion to the United States and the five Gulf states over 15 years. This is in addition to the US$ 1 billion already committed for early restoration. BPXP will also set aside an additional US$ 232 million to cover any further natural resource damages that are unknown at the time of the agreement.
• Economic and Other Claims - US$ 4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states (Alabama, Florida, Louisiana, Mississippi, and Texas).
• Local Governments - Up to US$ 1 billion will be paid to resolve claims made by more than 400 local government entities.

The NRD and CWA payments are scheduled to start 12 months after the agreement becomes final. Total payments for NRD, CWA and State claims will be made at a rate of around US$ 1.1 billion a year for the majority of the payment period.

BP Comments

BP’s chairman, Carl-Henric Svanberg, said, “Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise.” Bob Dudley, BP’s group chief executive, added, “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.”

Approval and Limitations

The agreements in principle are subject to execution of definitive agreements. These will comprise a Consent Decree with the United States and Gulf states with respect to the civil penalty and natural resource damages, a settlement agreement with five Gulf states with respect to State and local claims for economic and property losses, and release agreements with local government entities.

The Consent Decree will be subject to public comment and final court approval. The Consent Decree and settlement agreement with the Gulf states are conditional upon each other and neither will become effective unless (1) there is final court approval for the Consent Decree and (2) local government entities execute releases to BP’s satisfaction.

According to BP,

The agreements do not cover the remaining costs of the 2012 class action settlements with the Plaintiffs’ Steering Committee for economic and property damage and medical claims. They also do not cover claims by individuals and businesses that opted out of the 2012 settlements and/or whose claims were excluded from them. BP will continue to defend those claims vigorously. Today’s agreements in principle also do not resolve private securities litigation pending in MDL 2185.

More Information

Read the BP press release.

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