BP Plc (BP/) said it reached a $7.8 billion settlement with businesses and individuals over the 2010 Deepwater Horizon oil rig disaster, removing one of three major litigation fronts facing the company over the biggest offshore spill in U.S. history.
BP said yesterday in a statement that the settlement will be paid out of a $20 billion trust set up to compensate spill victims. Lawyers for the plaintiffs said in a separate statement that settlement will resolve most private claims for economic loss, property damage and medical injuries. Plaintiffs lawyers said there wasn’t a cap on the total damages BP has to pay.
“This settlement will provide a full measure of compensation to hundreds of thousands,” Stephen J. Herman and James P. Roy, the plaintiffs’ co-liaison counsel, said in their statement. “It does the greatest amount of good for the greatest number of people.”
U.S. District Judge Carl Barbier in New Orleans yesterday ordered the adjournment of a trial scheduled to start March 5 to determine which companies were liable for the explosion aboard Transocean Ltd. (RIG)’s Deepwater Horizon rig off the coast of Louisiana and the resulting spill.
The proposed settlement terms will be submitted to the court for approval, the judge said. Barbier said in his order that he will schedule a status conference with lawyers to discuss issues raised by the settlement and set a new trial date.
‘Realignment’
“Such a settlement would likely result in a realignment of the parties in this litigation and require substantial changes to the current Phase 1 trial plan,” Barbier said in the one- page order, which didn’t disclose terms of the agreement.
If “definitive and fully documented agreements” aren’t reached within 45 days, either side has the right to terminate the proposed settlement, according to BP’s statement. The settlement will allow victims who aren’t satisfied with the deal to “opt out,” according to BP.
BP said in its statement that the proposed settlement won’t increase the $37.2 billion charge it previously recorded in its financial statements for spill costs. That figure includes the $20 billion BP has set aside for the trust fund, which will be used to pay spill damage claims and medical injury claims as well as “state and local government claims, state and local response costs, natural resources damages and related claims,” BP said.
BP’s Costs
So far, BP says it has spent more than $22 billion on the spill, which breaks down to $8.1 billion to individuals, businesses and government entities and $14 billion on operational response.
The proposed settlement, costing BP an estimated $7.8 billion in addition to those amounts, includes $2.3 billion earmarked for economic losses related to the seafood industry in the Gulf of Mexico, the company said.
The proposed settlement, according to BP, doesn’t include claims against the London-based company by the U.S. Justice Department for Clean Water Act violations or natural resource damages under the Oil Pollution Act.
The settlement also “excludes certain other claims against BP, such as securities and shareholder claims” pending in separate litigation consolidated in federal court in Houston.
The agreement will provide for a transition from the Gulf Coast Claims Facility trust, through which BP has paid about $6.1 billion for more than 220,000 claims from individuals and businesses, the company said.
Direct Payments
“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,” BP said. “Should the trust not be sufficient, payments under the proposed settlement would be made by BP directly.”
BP was in talks with lawyers for the spill victims over a $14 billion proposal to be funded with money set aside for out- of-court settlements, three people familiar with the matter previously said. Under that plan, BP would close the trust and shift the remaining funds to plaintiffs, said the people, who declined to be identified because they weren’t authorized to speak publicly.
11 Killed
The April 2010 Macondo well blowout destroyed the Deepwater Horizon, killed 11 workers and sent more than 4 million barrels of oil spewing into the Gulf of Mexico over three months. It spawned hundreds of suits against BP, Vernier, Switzerland-based Transocean, owner and operator of the rig, and Houston-based Halliburton Co. (HAL), provider of cementing services on site.
On Feb. 26, the day before trial in the case was to begin, Barbier delayed the case by a week so settlement talks could continue.
BP has also been in settlement talks with the federal government and the partner companies that also face liability for the spill, people familiar with those discussions have said.
The U.S. Clean Water Act lets the U.S. seek fines of as much as $1,100 for each barrel of oil spilled as a result of simple negligence, often described as a failure to exercise ordinary care. The maximum increases to $4,300 a barrel for gross negligence, or a conscious act or omission, leaving BP liable for as much as $17.6 billion in fines.
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