Officials in Florida, Alabama, Mississippi, and Louisiana announced an $18.7 billion settlement with BP today that resolves years of litigation over the 2010 Gulf of Mexico oil spill. The settlement comes as a federal judge was preparing to rule on how much BP owed in federal Clean Water Act penalties after millions of gallons of oil spewed into the Gulf; individual states also were pursuing litigation. Most of those penalties were to be distributed among the states for environmental and economic restoration projects along the Gulf Coast. The settlement money will be used to resolve the Clean Water Act penalties and natural resources damage claims, settle economic claims, and resolve economic damage claims of local governments, according to an outline filed in federal court this morning.
Earlier this year, a New Orleans federal judge concluded the third phase of a civil trial pitting BP against the federal government. He had already made two key rulings: that BP acted with "gross negligence" in the rig explosion that resulted in the spill; and that 3.19 million barrels of oil spewed into the Gulf as a result. BP appealed both those rulings, which set the stage for a possible multibillion-dollar Clean Water Act penalty. In arguing against such a high penalty, BP has said its spill-related costs already were expected to exceed $42 billion—even without the Clean Water Act fine. Costs incurred by BP so far include an estimated $14 billion for response and cleanup and $4.5 billion in penalties announced after the settlement of a criminal case with the government. In its first-quarter earnings report for 2015, BP said it estimated at least a $10.3 billion cost, but it also stressed the cost could be higher, depending on how many legitimate claims were filed by a recently passed deadline.