NEW YORK — BP’s multibillion-dollar settlement deal with people and businesses harmed by its 2010 oil spill removes some uncertainty about the potential financial damages it faces. It also may help the company restore its all-important relationship with the federal government.
Although the company still has a few major legal and financial hurdles to overcome nearly two years after the spill in the Gulf of Mexico, the tentative settlement with plaintiff’s lawyers sends important signals to investors, Gulf Coast states and federal regulators.
Where once it seemed conceivable that BP’s spill-related costs could reach $200 billion, lawyers and industry analysts now say that figure will likely be less than a quarter that amount. If the class-action lawsuit by victims had gone to trial, BP could have faced much higher costs.
Another important element of the settlement deal — which BP estimates will cost $7.8 billion — is that it shows a willingness to pay a huge sum in order to resolve issues related to the spill.
“The only trial I thought we would see in this case is the one that just went away,” said David Uhlmann, a University of Michigan law professor who once headed the Justice Department’s environmental crimes section.
The blowout of the Macondo well in April 2010 destroyed a drilling rig called the Deepwater Horizon. That killed 11 workers, spilled an estimated 200 million gallons of oil and disrupted thousands of Gulf Coast lives and businesses. The spill soiled sensitive tidal estuaries and beaches, killed wildlife and closed vast areas of the Gulf to commercial fishing.
The settlement agreement announced Friday would apply to tens of thousands of victims across the Gulf Coast but does not resolve lawsuits with federal, state and local governments or address environmental damage. Those other claims could total up to $25 billion.
The settlement with the victims still needs approval of a federal court in New Orleans overseeing the case.
BP expects the settlement to be paid out of the remainder of a trust that the company had established to pay these types of claims. The trust now has $9.5 billion in assets left out of an initial $20 billion. Whatever remains in the trust after claims are paid out would return to BP.
BP, which is based in London, says it will not have to increase the total of $37.2 billion it has set aside to fund the trust and pay for other spill costs. Although some analysts expect BP to have to pay more eventually, the total would be much less than initially feared.
The settlement does not fully resolve the claims by the businesses and people covered by the settlement or put a final cost on them. The settlement creates a new fund that will pay all claims, but the total amount is not capped. It could ultimately add up to more or less than what BP estimates.
Also, individual victims are not required to accept it and could choose to bring separate cases.
Some Gulf Coast residents have not been satisfied with the claims process under the trust fund and are hoping the settlement makes it easier to receive compensation.View Entire Story
By Elaine Donnelly
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