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 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. (http://link.reuters.com/duz94w)
BP shares jumped more than 5 percent in New York trading as
investors said the British company, often mentioned as a potential
acquisition target, could now turn the page on one of the darkest
chapters in its century-long history.
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.
"This agreement will not only restore the damage inflicted on our
coastal resources by the Deepwater Horizon oil spill, it will also
allow Louisiana to continue aggressively fighting coastal erosion,"
said Governor Bobby Jindal of Louisiana, the hardest hit state.
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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.
BP's smaller size among the bigger oil majors has made it vulnerable
to potential takeovers, especially with the sharp drop in oil
prices.
"Companies have been slightly hesitant to make a bid while this has
been hanging over it, so I think it does clear the way for a
potential bid," said Joe Rundle, head of trading at U.K.-based ETX
Capital.
BP said the government and the states could jointly demand an
acceleration of payments if the company were acquired.
Previous settlements also included an uncapped fund originally set
at $7.8 billion to compensate individuals claiming economic harm
from the spill.
BP also settled with Transocean Ltd, which owned the Deepwater
Horizon drilling rig, and Halliburton Co, which worked on the
Macondo well.
"Now Gulf Coast restoration can begin in earnest. It's time to heal
the wounds that BP tore in Gulf Coast ecosystems and communities,"
said David Yarnold, CEO of the National Audubon Society.
(Reporting by Abhiram Nandakumar in Bengaluru, Ron Bousso in London
and Kathy Finn in New Orleans; Writing by Terry Wade; Editing by
Jeffrey Benkoe and Lisa Shumaker)
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