By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-BP Plc will settle $18.7 billion claims in Gulf oil spill involving the United States (U.S) and five (5) others in 2010.
The states are Alabama, Florida, Louisiana, Mississippi and Texas, it also includes settlement of claims made by more than 400 local government entities, according to a statement from the company.
BP says the payment will be spread over 18 years period, according to the preliminary agreement.
A breakdown of the payment plan according to the oil exploration and production company shows that BPXP is to pay the United States a civil penalty of $5.5 billion under the Clean Water Act (CWA) – payable over 15 years.
“BPXP will pay $7.1 billion to the United States and the five Gulf states over 15 years for natural resource damages (NRD). This is in addition to the $1 billion already committed for early restoration. BPXP will also set aside an additional amount of $232 million to be added to the NRD interest payment at the end of the payment period to cover any further natural resource damages that are unknown at the time of the agreement.
A total of $4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states.
Up to $1 billion will be paid to resolve claims made by more than 400 local government entities,” BP said.
According to BP, The expected impact of these agreements would be to increase the cumulative pre-tax charge associated with the Deepwater Horizon accident and spill by around $10 billion from $43.8 billion at the end of the first quarter (Q1).
“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.
“In deciding to follow this path, the Board has balanced the risks, timing and consequences associated with many years of litigation against its wish for the company to be able to set a clear course for the future.
“The Board therefore believes that this agreement is in the best long-term interest of BP and its shareholders. The Board set out its position on the dividend at the first quarter and this remains unchanged by the agreement,” Carl-Henric Svanberg, BP’s chairman, said.
While Bob Dudley, BP’s group chief executive, said: “This is a realistic outcome which provides clarity and certainty for all parties.
However, BP says the agreements do not cover the remaining costs of the 2012 class action settlements with the Plaintiffs’ Steering Committee for economic and property damage and medical claims.
Similarly, they also do not cover claims by individuals and businesses that opted out of the 2012 settlements and/or whose claims were excluded from them. “BP will continue to defend those claims vigorously. Today’s agreements in principle also do not resolve private securities litigation pending in MDL 2185,” the company added.
This settlement is coming on the heels of at least $28 billion BP has already spent on response, clean-up and compensation. It also exceeds by almost $3 billion the $43.8 billion the company set aside for fallout from the spill.