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Federal Judge Approves $20B Gulf Spill Settlement — And BP Can Write Off a Lot of It

Ninety-nine percent of public comment submitted to the US Department of Justice about the proposed settlement complained that BP would simply treat the penalty as a cost of doing business.

by Matt Smith
Apr 5 2016, 2:55pm

A photo taken on April 22, 2010 shows a fire aboard the Deepwater Horizon oil rig, located in the Gulf of Mexico 52 miles southeast of Venice, Louisiana. (Photo via US Coast Guard/EPA)

A federal judge has finalized a nearly $21 billion settlement between BP and the US government over the blowout that spewed oil into the Gulf of Mexico for nearly three months in 2010.

BP will pay $5.5 in penalties under the federal Clean Water Act under the 16-year deal, along with more than $7 billion for natural resource damages and $6 billion to the Gulf Coast states. In addition, the company will finish paying the $1 billion it's pledged in early restoration projects and cough up another $ 1 billion-plus to settle false claims, reimburse the US government and the states for their costs responding to the spill, and pay royalties on the oil lost in the disaster, as well as setting aside money for yet-undiscovered damages.

The deal "means that billions of dollars for the largest environmental restoration effort in American history can finally be put to work," a coalition of environmental groups — including the National Wildlife Federation, the Environmental Defense Fund, the National Audubon Society, the Ocean Conservancy, and The Nature Conservancy — said in a joint statement.

"This is a unique opportunity for state and federal agencies to work together toward a more resilient Gulf of Mexico," they added. "If done right, investment in the Gulf can have lasting benefits for the region and the nation."

Related: Alabama Taps BP Spill Funds for Another Upscale Beach Project

US District Judge Carl Barbier signed off on the $20.8 billion settlement Monday afternoon in New Orleans, bringing BP's running tab for the disaster to around $55 billion. In a brief statement, company spokesman Geoff Morrell said the company was "pleased" that the settlement was complete.

When the settlement was proposed last fall, many observers were angered by the fact that BP could write off the bulk of the payments on its taxes. Federal law prevents the company from taking a tax deduction for the $5.5 billion in Clean Water Act penalties, but it can claim the rest on its returns, according the settlement.

Nearly 99 percent of the 29,000 people that wrote to the Justice Department about the proposed settlement complained about that fact during the public comment period. But the government said that while the law only bars the company from claiming its fines as a business expense, a "relevant tax authority" will have the final say on whether other payouts can be deducted.

"This is the consistent process taken in all similar consent decrees," it said. "And it should be noted that had this case been litigated instead of settled, the outcome concerning tax liability would have been the same."

The April 20, 2010, blowout off Louisiana sank the drill rig Deepwater Horizon and killed 11 workers aboard. The undersea gusher it uncorked spewed crude into the Gulf for nearly three months before it was capped.

Tar balls and larger chunks of weathered oil are still washing up on beaches in the northern Gulf, and the federal government linked the spill to the deaths of large numbers of dolphins, tens of thousands of birds and turtles, and billions of oysters, one of the Gulf states' biggest products.

Related: The Federal Government Says Billions of Animals Died From the BP Disaster

Follow Matt Smith on Twitter: @mattsmithatl

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