BP Announces Oil Spill Settlement
Expects estimated $7.8 billion to be paid from $20 billion trust
Published in CSP Daily News
LONDON -- BP has reached a settlement with the Plaintiffs' Steering Committee (PSC), subject to final written agreement, to resolve the substantial majority of legitimate economic loss and medical claims stemming from the Deepwater Horizon accident and oil spill in the Gulf of Mexico in 2010.
BP estimates that the cost of the proposed settlement, expected to be paid from the $20 billion trust, would be approximately $7.8 billion. This includes a BP commitment of $2.3 billion to help resolve economic loss claims related to the Gulf seafood industry.
Prior to the proposed settlement, BP had spent more than $22 billion toward meeting its commitments in the Gulf. BP has paid out more than $8.1 billion to individuals, businesses and government entities. In addition, BP has spent approximately $14 billion on operational response.
"From the beginning, BP stepped up to meet our obligations to the communities in the Gulf Coast region, and we've worked hard to deliver on that commitment for nearly two years," said Bob Dudley, BP Group CEO. "The proposed settlement represents significant progress toward resolving issues from the Deepwater Horizon accident and contributing further to economic and environmental restoration efforts along the Gulf Coast."
This proposed settlement is not expected to result in any increase in the $37.2 billion charge previously recorded in BP's financial statements. BP's current expectation is that the provision for litigation and claims, which includes the claims covered by this proposed settlement, will increase by approximately $2.1 billion with no net impact to either the income or cash flow statements, because this is a settlement that is expected to be payable from the trust. The amount that can be further provided with no net impact to the income statement therefore is expected to be reduced from approximately $5.5 billion to approximately $3.4 billion.
While BP has sought to reliably estimate the cost of this proposed settlement, it is possible that the actual cost could be higher or lower than this estimate depending on the outcomes of the court-supervised claims processes, the company said.
The trust was established to satisfy not only legitimate individual and business claims, but also a number of other costs related to the accident and oil spill. Other costs to be paid from the trust include state and local government claims, state and local response costs, natural resource damages and related claims and final judgments and settlements. The company said that it is not possible at this time to determine whether the $20 billion trust will be sufficient to satisfy all of these claims as well as those under the proposed settlement. Should the trust not be sufficient, payments under the proposed settlement would be made by BP directly.
The proposed settlement does not include claims against BP made by the U.S. Department of Justice or other federal agencies (including under the Clean Water Act and for Natural Resource Damages under the Oil Pollution Act) or by the states and local governments. The proposed settlement also excludes certain other claims against BP and claims based solely on the deepwater drilling moratorium and/or the related permitting process.
The proposed settlement is comprised of two separate agreements, one to resolve economic loss claims and another to resolve medical claims.
Click here to view the full press statement about the settlement.