Gulf States Reach $18.7B Settlement With BP Over Oil Spill

VIDEO: The record settlement comes after 134 million gallons of oil were spilled into the Gulf following the Deepwater Horizon oil rig explosion in 2010.

BP and five Gulf states announced a record $18.7 billion settlement Thursday that resolves years of legal fighting over the environmental and economic damage done by the energy giant’s oil spill in 2010.

The settlement, if accepted by a federal judge, would end a yearslong battle between BP and the U.S. government over Clean Water Act penalties after a judge ruled the company was grossly negligent in the nearly 134 million gallon spill.

It would resolve the states’ natural resources damage claims and settle economic claims involving state and local governments in Florida, Alabama, Mississippi, Louisiana and Texas, according to an outline filed in federal court.

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

The settlement will likely mark the end of major litigation against BP, following the biggest offshore oil spill in U.S. history. When the Deepwater Horizon oil rig exploded in April 2010, it killed 11 people on board and spread miles of black oil across the Gulf Coast before the underwater well was capped a few months later.

Governors and attorneys general from four of the five states to receive money from the settlement announced it during simultaneous news conferences Thursday morning just as the court filings were made public.

The court filings consisted of a confidentiality order that gave broad outlines of the deal, including the money involved, but it did not go into specifics and barred any of the parties from doing so.

Louisiana Attorney General Buddy Caldwell said the agreement ends litigation that could have dragged on for years, delaying the state’s ability to repair and rebuild its coast and wetlands.

“Today’s settlement is a game-changer for Louisiana, its communities and its families,” Caldwell said. But he cautioned that it’s a deal in principle only, with the finer details remaining to be worked out in a final consent decree he expected to be complete in about two months.

Louisiana received the largest share of the settlement money — about $6.8 billion — and Caldwell said the payments will be received over the next 16 years.

Alabama Attorney General Luther Strange called the settlement a “home run,” and he and Gov.Robert Bentley said they believed a looming jury trial was a significant factor in reaching the settlement.

Financial analysts congratulated BP CEO Bob Dudley and Chief Financial Officer Brian Gilvary during a conference call about the terms of the deal Thursday, and investors cheered the move, pushing BP shares up 5 percent in midday trading.

While the payout is larger than BP had provisioned for, the company’s Clean Water Act fines are less than they could have been. Plus, the payout is scheduled over so many years that BP will be able to pay investors a dividend and have enough financial flexibility to make deals and pursue large production projects. Dudley said during the conference call that he could see as many as 20 major new projects by 2020, depending on oil prices.

“This allows us to manage BP as an oil company,” Dudley said.

BP said the cumulative charge associated with the spill, before taxes, would rise to $53.8 billion from $43.8 billion at the end of March.