Gulf states reach $18.7 billion settlement with BP over 2010 oil spill

The federal government and Gulf Coast states announced a record-setting $18.7 billion settlement with BP on Thursday that resolves years of litigation over the 2010 Gulf of Mexico oil spill and delivers the largest environmental settlement ever.

The settlement announcement comes as a federal judge was preparing to rule on how much the British oil giant owed in federal Clean Water Act penalties for its role in allowing millions of gallons of oil to spew into the Gulf. BP was leasing the Deepwater Horizon rig in April 2010 when it exploded and sank off the coast of Louisiana, killing 11 crewmen and releasing some 200 million gallons of crude into the Gulf.

The settlement includes $5.5 billion in Clean Water Act penalties and $8.1 billion in Natural Resource Damages, which help states reverse damage from the spill, according to the Justice Department. A judge must approve the settlement before it is final.

Those are the highest totals ever for those federal penalties, said David Uhlmann, former chief of the Justice Department's Environmental Crimes Section and an environmental law professor at the University of Michigan. It also contained another $5.9 billion in economic claims by state and local governments.

“It's an enormous settlement resolving nearly all outstanding claims for the Gulf oil spill,” Uhlmann said “The message is absolutely clear: companies must place far more emphasis on environmental protection and safety than BP did prior to the Gulf oil spill.”

BP had said its spill-related costs would likley exceed $42 billion, even without the Clean Water Act fine. It's unclear how much BP will end up paying under a 2012 settlement with individuals and businesses claiming spill-related losses.

In a statement, Attorney General Loretta Lynch said applauded the efforts by the legal team to bring about resolution of the case.

“If approved by the court, this settlement would be the largest settlement with a single entity in American history,” Lynch said. “It would help repair the damage done to the Gulf , fisheries, wetlands and wildlife; and it would bring lasting benefits to the Gulf region for generations to come.”

The National Audubon Society said the settlement sends an important message.

“You break it, you pay for it – that's how this is supposed to work,” Audubon President and CEO David Yarnold said in a statement. “Now Gulf Coast restoration can begin in earnest. It's time to heal the wounds that BP tore in Gulf Coast ecosystems and communities.”

Costs incurred by BP so far include an estimated $14 billion for response and cleanup and $4.5 billion in penalties announced after a settlement of a criminal case with the government.

In 2012, BP reached the settlement with plaintiff's lawyers over economic and property damage claims arising from the spill. In its first-quarter earnings report for 2015, BP said it could estimate at least a $10.3 billion cost. But it also stressed that the cost could be higher, depending on how many legitimate claims were filed by a recently passed deadline.

Earlier this year, a federal judge in New Orleans concluded the third phase of a civil trial pitting BP against the federal government, finding that BP acted with “gross negligence” in the rig explosion that resulted in the spill.

Read more: Gulf states reach $18.7 billion settlement with BP over 2010 oil spill

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