U.S. reaches $18.7B settlement with BP

Fine stems from 2010 Gulf oil spill

WASHINGTON — The blockbuster $18.7 billion oil spill settlement unveiled Thursday between the U.S. government and oil company BP gave the Justice Department what it wanted: the biggest environmental fine ever levied against a corporation. It also gave BP what it needed: a sense of closure after years spent fighting costly and complex courtroom battles over its role in the worst oil spill in U.S. history.

The deal marks a final reckoning for the Deepwater Horizon spill in the Gulf of Mexico, which riveted the nation for months in 2010 as television networks and web sites continuously showed underwater video of the leak, and as the Obama administration struggled to respond effectively.

The settlement ends all federal and state government civil suits against BP for its part in the disaster that killed 11 crew members, immolated the huge drilling rig and leaked roughly 4 million barrels of crude oil into the water.

With Thursday’s announcement, the London-based oil giant said it planned to add $10 billion to the already-enormous reserve it had set aside to cover costs related to the spill, bringing the cost of the spill by the company’s own estimate to $53.8 billion.

Despite the jaw-dropping number, the latest payments will be manageable for the energy behemoth. The settlement allows BP to make payments over 18 years, making the deal easier to swallow and effectively reducing the size of the settlement, after adjusting for interest rates and inflation.

Even while many environmental groups say the company hasn’t done enough, BP has paid a steep

price for the environmental disaster. The company has sold off assets and become leaner in order to afford expenses associated with the spill. It also ousted its chief executive.

In the aftermath of the spill, BP had a choice: It could fight its liabilities for decades in court, just as Exxon (now Exxon Mobil) did after the 1989 Valdez oil spill off the coast of Alaska. Or it could apologize profusely and open up its wallet, promising to pay any victims who came forward.

During the spill, top executives met with President Barack Obama at the White House and agreed to set up a $20 billion fund to cover clean-up costs and damages. Later, BP paid out or agreed to pay out billions for a myriad of claims, including more than $7.8 billion to private individuals and companies such as gulf fishermen and coastal hotels through a New Orleans court and $4.5 billion to settle criminal charges.

By contrast, Exxon litigated for two decades over the Valdez spill and paid only $1 billion in the end.

“If approved by the court, this settlement would be the largest settlement with a single entity in American history,” Attorney General Loretta Lynch said in a statement Thursday. “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.”

Despite the 2010 spill, BP remains one of the largest foreign investors in the United States and one of the most active oil and gas exploration companies in the Gulf of Mexico. The company has eight rigs operating in the dark, ultra-deep waters of the Gulf, more than it had before the disaster.

Bob Dudley, BP’s chief executive, issued a statement calling the deal “a realistic outcome which provides clarity and certainty for all parties.” He said it would provide “a significant income stream over many years for further restoration of natural resources and for losses related to the spill.”

Investors on Thursday breathed a sigh of relief. The company’s stock price jumped more than 5 percent Thursday to $41.30 a share on news of the agreement. That reaction reflects BP’s deep resources; the annual $1 billion payments will be dwarfed by the company’s annual capital expenditures, currently running about $20 billion.

After all these years, scientists still don’t know the full environmental impacts of the spill, nor is it clear that the oil and gas industry would respond more quickly and effectively if there were another deepwater blowout. “It’s impossible to say whether the numbers are good or not,” said David Pettit, a senior attorney for the Natural Resources Defense Council, a non-profit environmental group. “It’s a big number, but we can’t tell if it’s big enough.”

The agreement comes five years and 73 days after the blowout in mile-deep water led to an explosion aboard the Deepwater Horizon. There had never been a blowout at such depths, and initial efforts to shut in the well failed.

The rig sank on April 22, 2010, coming to rest upside down on the muddy floor of the gulf about 1,500 feet 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.

One key issue in the event’s aftermath was BP’s negligence, especially as various investigators uncovered a series of fateful decisions leading up to the disaster. New Orleans District Judge Carl Barbier last year found BP guilty of “gross negligence.” Earlier this week, the Supreme Court denied BP’s petititon to overrule the decision.