Oil Spill Penalties To Draw Record $18.7 Billion From BP

Is $19 billion enough to settle fallout from the most disastrous offshore oil spill in the nation’s history?

Pending approval from a federal judge, BP will pay out $18.7 billion to settle federal and state claims including Clean Water Act breaches and other violations resulting from its catastrophic oil spill in the Gulf of Mexico five years ago.

Officials say the deal would constitute “the largest environmental settlement — and the largest civil settlement with any single entity — in the nation’s history,” according to The New York Times.

The payment would close out much of BP’s tab for the spill. Here’s what it would settle, according to TIME

[The deal resolves] all federal and state claims that came out of the Deepwater Horizon accident and included agreements with five Gulf Coast states — Alabama, Florida, Louisiana, Mississippi, and Texas — as well as more than 400 local governments. BP’s settlement also includes a $5.5 billion civil penalty to be paid over the next 15 years under the Clean Water Act. The company said in early July that the settlement brings the total amount BP has paid as a result of the 2010 oil spill to $53.8 billion.

Some analysts say the amount is not that colossal in the context of what BP could have been forced to surrender. “Although the total promised by BP is the largest ever environmental settlement for a single company, it is modest when compared with the sums that governments had claimed, or were potentially looming, in the future. Moreover, it is spread over a period of 15 to 18 years,” the Financial Times noted

Financial analysts saw the deal as a positive outcome for BP. The Financial Times reported that “in the City of London, the response was positive. BP’s shares ended 4.4 percent higher.”

A Harper’s report, cited by Salon, characterized the settlement as insufficient. “No one can say that $18.7 billion is not a lot of money. Unfortunately, BP also caused the biggest oil spill in world history, and that brings with it a lot of costs, to deal with a lot of very devastating impacts,” reporter Antonia Juhasz wrote in the Harper’spiece.

Salon continued, again citing Juhasz:

A rough calculation of the damage caused by BP, and its liability under the law, reveals just how much it may have gotten away with: the company could have gotten off more cheaply, but it also could have been on the line for $13.7 billion in Clean Water Act fines alone (the federal government originally asked for $18 billion); the settlement includes those fines along with all natural resource and economic damage and restoration claims. The settlement, Juhasz calculates, only represents “about a third of what BP should have paid, and what the Gulf needs — and, from my perspective, from what the industry needs.” The fines levied in a disaster of this sort, she explained, should not only represent the full extent of the law, and not only provide for full economic and environmental restoration of the areas impacted, but all work as an industry-wide deterrent against future wrongdoing. (BP, remember, was found to be “grossly negligent” in causing the explosion and spill.) As Shell prepares to start drilling the Arctic, it’s a lesson that can’t be reinforced enough.

Nevertheless, the company may have more to pay, according to TIME. “BP is still facing compensation claims filed by tens of thousands of area businesses claiming that they suffered losses as a result of the oil spill.”

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