In the largest criminal penalty in history, BP will pay $4.5 billion to settle a federal case over the April, 2010 Deepwater Horizon oil spill.
The settlement will resolve numerous criminal claims against BP brought by the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC). As part of the agreement, BP also agreed to plead guilty to 11 felony counts related to the 11 workers killed in the disaster, two misdemeanors, and one additional felony count for obstruction of Congress. Announcing the deal on its website, BP says that all but one of these charges “are based on the negligent misrepresentation of the negative pressure test conducted on board the Deepwater Horizon.” BP says they acknowledged this two years ago when they released an internal investigation of the disaster.
There’s still the open question of ongoing civil claims against BP for the spill, as well as several outstanding state and private claims. BP says in a statement today that it will “vigorously defend itself against remaining civil claims” and that they weren’t “grossly negligent.”
So where will those billions go, and when does BP pay them?
The majority of the payments, $4 billion to resolve the DOJ case, will be spread out over five years. The remaning $525 million to settle the SEC case will be paid out over three years. Much of that money will go to the National Fish and Wildlife Foundation, which will receive $2.3 billion. $350 million will go to the National Academy of Sciences.
The disaster — the biggest accidental oil spill in history — killed 11 and spilled 206 million gallons of oil into the sea. BP estimates the disaster has cost them $38 billion to date, and with today’s settlement that number will go up to nearly $42 billion. But the company doesn’t expect to go bankrupt anytime soon. The company has seen over $9 billion in profits during the first three quarters of 2012.
The guilty plea by BP is not without significance, according to Houston Chronicle business and energy columnist Loren Steffy.:
“What matters far more is that the company will now be branded as a felon. In the Texas City disaster, BP pleaded guilty to one felony count, despite the loss of 15 lives. Even then, it was a division of the company, not the company itself, that bore the distinction as a corporate criminal.
Several individuals still may face criminal charges as well. That, too, sends an important message to executives that their decisions matter. The point of the case, though, can’t merely be to punish BP. BP has to fundamentally change its culture, beginning at the top of the organization.”
“All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf coast region,” Bob Dudley, BP’s Group Chief Executive, says in a a statement. “From the outset, we stepped up by responding to the spill, paying legitimate claims and funding restoration efforts in the Gulf. We apologize for our role in the accident, and as today’s resolution with the U.S. government further reflects, we have accepted responsibility for our actions.”
BP says that as part of the settlement, they’ve “agreed to take additional actions, enforceable by the court” to increase safety in their Gulf of Mexico drilling operations.