Documents detailing BP’s more than $20 billion settlement terms with the U.S. government and five coastal states concerning the deadly 2010 Deepwater Horizon oil spill in the U.S. Gulf of Mexico have been filed in federal court, the Justice Department said.

The settlement, which is the largest of its kind in U.S. history, would put to rest Clean Water Act, Natural Resource Damage and other claims if it receives final approval.

The finalized terms were announced during a press conference on Oct. 5. Attorney General Loretta Lynch said BP is “receiving the punishment it deserves” while also providing compensation for harm to environment and the economy of the Gulf Coast region.

“The steep penalty should inspire BP and its peers to take every measure necessary to ensure that nothing like this can ever happen again,” Lynch said.

The resolution was first announced in July. In the months since, authorities have incorporated the settlement, reached in principle at the time, into a consent decree that was filed Oct. 5 along with a 15-year restoration plan. A key difference between the $18.7 billion previously announced by BP is the recent figure includes $1 billion previously committed by BP for early restoration projects.

"The filing of the consent decree does not reflect a new settlement or any new money," BP spokesman Geoff Morrell said in a statement to Hart Energy. "It covers the same payments—and same amounts—disclosed by BP when we announced this agreement in July. The government has announced a number that includes amounts previously spent or disclosed by BP."

The decree stipulates that BP must pay:

  • $5.5 billion, plus interest, for violating the Clean Water Act. Eighty percent of this would go toward environmental restoration and economic projects in the five coastal states impacted. The decree also states the amount resolves claims concerning noncompliance issues brought by the Bureau of Safety and Environmental Enforcement;
  • $8.1 billion in natural resource damages. This amount includes the previously committed $1 billion for early restoration projects. Funds here will be used to restore damaged natural resources in the Gulf of Mexico region;
  • Up to $700 million more in natural resource damages for unknown conditions and adaptive management; and
  • $600 million to additional reimbursements to governments. The funds will be used for assessment and removal costs, lost royalties and to resolve a False Claims Act investigation.

In separate agreements reached with BP, the Justice Department said the company is also resolving the five gulf states’ economic damages claims for $4.9 billion and local governments’ economic damages claims for up to $1 billion, respectively.

Payments would be made over 18 years to settle the claims.

The public will have 60 days to comment on the decree before it goes to the court for final approval.

“For BP, this agreement will resolve the largest liabilities remaining from the tragic accident and enable BP to focus on safely delivering the energy the world needs,” BP CEO Bob Dudley said in July. “For the United States and the Gulf in particular, this agreement will deliver a significant income stream over many years for further restoration of natural resources and for losses related to the spill.”

On April 20, 2010, drillpipe buckled in the blowout preventer at the Macondo well, preventing the blind shear rams from cutting the pipe. Eleven rig workers died and millions of barrels of oil flowed from the wellbore, causing environmental and economic damage. The incident led to improved BOP designs and stronger procedures and inspections.

The Environmental Protection Agency (EPA) calculates the settlement equates to $1,725 per barrel of oil spilled, EPA Administrator Gina McCarthy said.

“No amount of money can erase the fear and loss that they endured, but it can help them recover and rebuild,” McCarthy said. “Justice is not about dumping a pile of money and walking away. It is about investing in sustainable ways that empower and strengthen the Gulf communities over the long term.”

The consent decree also has injunctive relief and compliance assurance components. BP could face penalties if it misses a payment deadline. And if BP files for bankruptcy, becomes insolvent or changes ownership, an acceleration clause would allow the governments to require immediate payment.

Public comment will also be taken on the restoration plan that utilizes up to $8.8 billion in restoration damage payments. The draft plan aims to:

  • Restore and conserve habitat;
  • Restore water quality;
  • Replenish and protect living coastal and marine resources;
  • Provide and enhance recreational opportunities; and
  • Provide for monitoring, adaptive management, and administrative oversight to support restoration implementation, according to a news release from the Deepwater Horizon Natural Resource Damage Assessment Trustees.

“Once approved by the court, this agreement will launch one of the largest environmental restoration efforts the world has ever seen,” Lynch said.

Velda Addison can be reached at vaddison@hartenergy.com.