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BP Just Agreed to Pay $19 Billion in Damages for the 2010 Deepwater Horizon Disaster

Federal officials and environmentalists have praised the deal, the largest environmental settlement in US history, which will help cover the costs of Gulf Coast restoration.

by Matt Smith
Jul 2 2015, 5:10pm

Photo via US Coast Guard/EPA

Oil giant BP says it will pay nearly $19 billion in fines and restoration costs for the Deepwater Horizon disaster that fouled the Gulf of Mexico — the largest environmental settlement for the largest offshore oil spill in US history.

Details are still being hammered out, and a federal judge in New Orleans must approve a final deal. But both the government and BP called the agreement a way to get the issue out of court and get on with restoration work. Environmentalists gave the proposal a cautious thumbs-up, even though the penalties were far less than what BP could have been hit with in court.

"I would really like for it to be a lot larger," Casi Callaway, the head of the Alabama watchdog group Mobile Baykeeper, told VICE News. "But the chances of us getting everything I wanted were pretty slim."

The 15-year deal includes $5.5 billion in Clean Water Act penalties, another $7.1 billion to restore damaged natural resources and $4.9 billion for economic losses to the five Gulf Coast states, according to the US Department of Justice. When funds for local governments and money already committed for restoration projects gets added in, the proposed settlement totals $18.7 billion.

"If approved by the court, this settlement would be the largest settlement with a single entity in American history," Attorney General Loretta Lynch said in a written statement. "It would help repair the damage done to the Gulf economy, fisheries, wetlands, and wildlife; and it would bring lasting benefits to the Gulf region for generations to come."

Related: Tar balls, disappearing islands, and 'unexplained mortality events': five years after the BP disaster

The disaster began on April 20, 2010, when a blowout killed 11 workers aboard the drill rig Deepwater Horizon and uncorked an undersea gusher off the Louisiana coast. The BP-owned well spewed crude into the Gulf for nearly three months before it was capped, dumping what a court ultimately decided was 134 million barrels of oil into the sea.

Thursday's settlement will bring BP's costs from the disaster to well over $50 billion. The company says it had set aside more than $43 billion to pay its total expected tab, and the settlement will drive that up by about $10 billion. The company has already spent about $35 billion for cleanup, compensation, and fines, including $4.5 billion after pleading guilty to manslaughter in the deaths of the rig workers. It's also put up half a billion to support scientific research into the lingering effects of the spill.

"I think the devil's really in the details when it comes to this, and those are still emerging," Gulf Restoration Network spokesman Raleigh Hoke told VICE News. But, he added, "By settling now, we're ensuring this money starts flowing pretty soon, rather than waiting years or even decades."

The $5.5 billion under the Clean Water Act was less than hoped for, since federal law requires that 80 percent of that money be earmarked for Gulf restoration work. BP could have faced up to $13.7 billion in Clean Water Act penalties after US District Judge Carl Barbier found that the company's gross negligence fueled the spill.

Hoke and others, like Louisiana shrimper and oysterman George Barisich, have raised fears that restoration funds may end up being spent on pork-barrel projects in the Gulf States.

"Every year that our recovery is delayed, it costs more and more and more," Barisich told VICE News. "But the caveat here is if the people in charge of it actually do what's needed to be done, and if it's not pissed away on studies and stuff that's unrelated to recovery."

Barisich said the first priority should be dredging to rebuild barrier islands, coastal marshes and oyster beds that collapsed in the wake of the spill. But one person's boon is another person's boondoggle, and some of the projects are already controversial. 

Environmental groups like the Gulf Restoration Network have criticized Alabama officials for using restoration money to rebuild a beachfront convention center that was wrecked by a 2004 hurricane. Fishermen oppose the diversion of Mississippi River fresh water into Louisiana's coastal wetlands in hopes that fresh sediment will halt their rapid disappearance — but which Barisich said risks further losses of oysters, which need a balance of salt and fresh water to live.

"When you get a healthy oyster environment it's like a canary in the mine," he said. "If we've got a healthy oyster environment, that purifies the water and things are better for everything else. That's the job of the oyster reefs."

Related: Five years after BP disaster, Gulf of Mexico's fishing industry continues to struggle

Louisiana's oyster beds were devastated when the state opened Mississippi spillways in an attempt to flush out the oil and have yet to rebound. Scientists are still studying whether other Gulf species have been affected by the oil or the dispersant used to break it up in ways that will make it harder for them to survive.

Mobile Baykeeper's Callaway said the final settlement should have language that allows it to be reopened if new damage emerges, like the crash in the Alaskan herring population that came years after the 1989 Exxon Valdez disaster. But the long-term payout envisioned in the deal could be good for restoration work, she said.

"We're never going to have a giant pot of money at one time that we can spend for some really bad projects," Callaway said. "But it also means that we've got some time to finalize the process for project selection. I think we should have had that a year and a half or two years ago ... today's announcement means we can't wait any longer. We've got to have a plan."

Meanwhile, Collin O'Mara, the CEO of the National Wildlife Federation, called the proposed deal "a victory for the wildlife of the Gulf."

"This brings to a close the long legal ordeal that had left restoration efforts in limbo and it gives us certainty moving forward," O'Mara said. "Now it is time for Gulf restoration to begin in earnest."

In a written statement, BP Chairman Carl-Henric Svanberg said the deal delivers on BP's promise "to restore the Gulf economy and environment."

"We have made significant progress, and with this agreement we provide a path to closure for BP and the Gulf," Svanberg said. "It resolves the company's largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved."

BP has said the Gulf is bouncing back better than expected from the disaster and has accused Gulf state businesses of fleecing its existing compensation program with fraudulent claims. But many on the coast say they're still grappling with the effects of the spill, from diminished seafood catches, tar balls on the beaches, and an ongoing spike in dolphin deaths.

In May, federal researchers linked that "unexplained mortality event" to the spill, telling reporters that "no feasible alternative causes remain" for the rash of lung and adrenal problems found in dead dolphins. BP disputed the findings, saying the study failed to trace oil to the ruptured well and that the rise in dolphin deaths had begun before the blowout. 

Follow Matt Smith on Twitter: @mattsmithatl