BP plc (BP: Quote) said Thursday it will pay about $4.5 billion to the U.S. government to settle criminal and securities claims over the 2010 Deepwater Horizon accident in the Gulf of Mexico that claimed 11 lives and led to a massive oil spill.
The settlement, which will span a total of six years, includes payment of $4 billion to the Department of Justice and $525 million to the Securities and Exchange Commission.
"We believe this resolution is in the best interest of BP and its shareholders," said Carl-Henric Svanberg, BP's chairman.
"It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims," Svanberg added.
BP has agreed to plead guilty to 11 felony counts of Misconduct or Neglect of Ships Officers relating to the loss of 11 lives, one misdemeanor count under the Clean Water Act.
It will also plead guilty to one misdemeanor count under the Migratory Bird Treaty Act, and one felony count of lying to Congress about the extent of oil that was being spilled.
The total settlement includes about $1.26 billion in criminal fines, about $2.4 billion to the National Fish and Wildlife Foundation, $350 million to the National Academy of Sciences. The settlement is subject to U.S. federal court approval.
BP is still subject to other claims, including federal civil claims and claims for damages to natural resources. The settlement does not include a potentially hefty penalty under the Clean Water Act, which may cost BP as much as $21 billion. BP said it will continue to vigorously defend itself against all remaining civil claims.
BP said the settlement with the U.S. is expected to result in an increase of about $3.85 billion to the $38.1 billion charge taken against income as of end September.
The Deepwater Horizon rig drilling BP's Macondo well sank two days after the April 20, 2010 explosion and led to an oil spill of about 200 million gallons that impacted beaches and the fishing sector. The well was finally capped on July 15 that year.
The government also sued the rig's owner Transocean Ltd. (RIG), and contractor Halliburton Co. (HAL), but legal proceedings led to BP taking the blame for the accident.
A federal probe found that BP along with the rig owner and contractor had resorted to cost and time cutting measures that impacted safety of the operations, and prompted the government to temporarily ban deepwater drilling.
To date, BP has paid more than $9 billion to individuals, businesses and government entities and has already agreed to a settlement with the Plaintiffs' Steering Committee, resolving the majority of outstanding private economic loss, property damage and medical claims, which BP estimates will cost about $7.8 billion.
A part of that amount has been paid out of the $20 billion Gulf Coast oil spill compensation trust fund the company set up in 2010. BP is making the final $860 million payment into the $20 billion fund this quarter. BP has to date spent more than $14 billion in operational response and clean-up costs in the U.S.
BP returned to a profit in the third quarter even as it has been selling assets to raise funds to pay for the oil-spill costs.
Previously, the largest corporate criminal penalty imposed by the DoJ was a $1.2 billion penalty on drug giant Pfizer in 2009.
BP stock is trading at $40.37, up 0.52%, on a volume of 6.5 million shares on the NYSE.
On the LSE, the stock closed at 425.40 pence, down 0.08%, on a volume of 49.7 million shares.
by RTT Staff Writer
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