BP chairman Carl-Henric Svanberg. Image courtesy of BP/Flickr.

Louisiana, Florida, Mississippi, Texas and Alabama agreed Thursday to accept an $18.7 billion settlement from BP that will resolve the years long Deepwater Horizon case.

The agreement will cover claims from the five Gulf states as well as 400 local government entities, BP said.

The company was facing up to $13.7 billion in Clean Water Act penalties tied to the 2010 spill that killed 11 people.

The settlement was executed by BP’s U.S upstream subsidiary, BP Exploration and Production (BPXP).

BPXP will pay the United States a civil penalty of $5.5 billion under the Clean Water Act that is payable over 15 years.

The subsidiary will also pay $7.1 billion to the United States and the five Gulf states over 15 years for natural resource damages.

That sum is in addition to the $1 billion already committed for early restoration.

BPXP will also set aside an additional $232 million to be added to the natural resource damages interest payment at the end of the payment period to cover any further natural resource damages that were unknown at the time of the agreement.

The company said $4.9 billion will be paid over 18 years to settle economic and other claims made by the five Gulf Coast states and up to $1 billion will be paid to resolve claims made by more than 400 local government entities.

BP said the agreements are expected to increase the cumulative pre-tax charge tied to the 2010 Deepwater Horizon accident and spill by around $10 billion from $43.8 billion at the end of the first quarter.

“Separately to these agreements, the total charge reported in BP’s second quarter results will also reflect other items including charges for additional business economic loss determinations.”the company said.

The Deepwater Horizon Trust Fund, established to meet claims in 2010 after the spill, is expected to be used to make payments, other than Clean Water Act fines and penalties, including $1 billion of state claims and up to $1 billion to settle local claims.

“Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise. We have made significant progress, and with this agreement we provide a path to closure for BP and the Gulf. It resolves the company’s largest remaining legal exposures, provides clarity on costs and creates certainty of payment for all parties involved,” BP chairman Carl-Henric Svanberg said.

The agreements do not cover the remaining costs of the 2012 class action settlements with the Plaintiffs’ Steering Committee for economic and property damage and medical claims.

Individuals and businesses that opted out of the 2012 settlements or whose claims were excluded from them are also not covered by the agreements.

BP said it will continue to defend those claims “vigorously.”


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