Shares of BP Plc (NYSE: BP) are spiking following the announcement of an $18.7 billion settlement by BP that accounts for all state and federal claims against the oil giant relating to its 2010 Deepwater Horizon oil spill.
“Five years ago we committed to restore the Gulf economy and environment and we have worked ever since to deliver on that promise”, he said in a statement.
Payments will begin around one year from the final agreement and will be around $1.1bn a year for the majority of the payment period.
BP had said its spill-related costs already were expected to exceed $42 billion, even without the Clean Water Act fine.
“This is a realistic outcome which provides clarity and certainty for all parties”, BP’s chief executive Bob Dudley said in a statement.
USA Attorney General Loretta E Lynch said the BP settlement was the largest to be paid by a single company in USA history. A record $5.5 billion will cover federal penalties under the Clean Water Act, topping the previous high of $1 billion.
And environmental groups, including the National Audubon Society and the Environmental Defense Fund (EDF), praised the settlement, noting that it could add a measure of responsibility to this type of oil exploration in general.
The 2010 explosion killed 11 workers and spilled almost 5 billion barrels of oil into the Gulf, hurting the local sea life and affecting tourism and restaurants in the area.
“This agreement will not only restore the damage inflicted on our coastal resources by the Deepwater Horizon oil spill, it will also allow Louisiana to continue aggressively fighting coastal erosion”, Louisiana Governor Bobby Jindal. It also includes settlement of claims made by more than 400 local government entities.
Investors cheered the move, pushing BP shares up 5 percent in midday trading. “With the agreement announced today, we are taking a significant step forward in our State and will become a stronger, safer and more resilient state as a result of this awful disaster”. That’s much lower than the $13.7 billion penalty BP was facing in an ongoing case.
Through various provisions in the settlement, Louisiana stands to receive $6.8 billion from BP, in addition to the more than $3 billion the company has already paid the state because of the spill.
The settlement brings BP’s total tab for the spill to $53.8 billion, more than its combined profits since 2012.
Earlier this year, a federal judge in New Orleans concluded the third phase of a civil trial pitting BP against the federal government.
However, the settlement is far from the end of the litigation over the Deepwater Horizon spill, as shareholder lawsuits remain.