Five years has passed since the 2010 Deepwater Horizon oil spill. On Thursday, BP Plc (NYSE: BP) agreed to pay an $18.7 billion settlement to annul all federal and state government claims, resolving the biggest litigation over environmental disaster and human casualty.
The deal involving the states of Alabama, Mississippi, Texas, Florida, and Louisiana, also includes claims made by 400 local government entities.
The rig explosion resulted in killing 11 workers and the spilling of millions of barrels of crude oil into the Gulf and shorelines of several states. The company, whom has already taken charges of over $40 billion for compensation and clean up fees, will allocate the settlement over the next 18 years. This settlement will finally end numerous liabilities for the U.K. oil giant, allowing investors to seek possible future growth of the company.
BP’s New York-traded shares rose as much as 5% to $41.20 following news of the long-awaited settlement.
In the settlement, BP will pay a civil penalty of $5.5 billion under the U.S. Clean Water Act, payable over 15 years. In addition, the company is obliged to pay $7.1 billion the U.S. and five Gulf states over 15 years for natural resource damages – $1 billion already compensated for early restoration and $232 million to cover any further resource damages. And economic claims made by the five Gulf states will require $4.9 billion to be paid over 18 years.
“Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise. We have made significant progress, and with this agreement we provide a path to closure for BP and the Gulf. It resolves the company’s largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved,” said Chairman of BP, Carl-Henric Svanberg.