BP’s multibillion-dollar settlement 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 oil 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 along with the embarrassment of having to publicly rehash the mistakes that led to the spill.
The settlement, which BP estimates will cost $7.8 billion, also shows its willingness to pay a huge sum to resolve issues related to the spill. That may improve its standing with the federal government, which controls access to oil reserves that are critically important to BP’s future.
“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.
A 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 announced Friday would apply to tens of thousands of victims along the Gulf Coast, including fishermen who lost work and cleanup workers who got sick. It still needs approval of a federal court in New Orleans.
BP expects to pay the victims using the remainder of a trust fund that the company had established to pay these types of claims. The trust has $9.5 billion in assets left out of an initial $20 billion. Whatever remains would return to BP.
Friday’s deal does not resolve lawsuits with federal, state and local governments or address environmental damage. Those other claims could total up to $25 billion.