According to a statement issued by BP, its US exploration and production arm will pay $5.5bn as a penalty to the “Feds” over a 15 year period. This portion could have been as high as $13.7bn, based on the amount spilled - decided to be 3.19m barrels - and the maximum penalty per barrel - more than $4,000/barrel. It will also pay the five states, and the Federal government, approximately $7.1bn, for Natural Resources Damages- also payable over a 15 year timeframe.
A smaller amount, some $232m, would be set aside for possible future payment, regarding damages not known at the time of the settlement. Another $5.9bn will go towards economic claims made by the five Gulf states and by several hundred local governmental entities. This portion would be paid out over 18 years.
This recent round of payments comes in addition to costs racked up previously, in the years following the spill. The bills for the original spill response, stemming from oil leaked from the Macondo well before it was capped, came to around $14bn. Various claims liabilities, to local business and other private entities suffering economic damage as a result of the spill, had already reached at least $13bn, either paid, or agreed. Included in this amount is $2.3bn to pay members of the seafood industry-with about half paid out so far. Estimates of additional claims are in the range of $7bn to $9bn.
Shortly after the spill, BP had set up a $20bn fund to cover such liabilities; there has been considerable rancor about the claims for damages, with BP claiming excessive gouging by claimants, with measurement of economic damages unsubstantiated and bloated in some cases. Members of the oil services community, which benefits from a healthy BP, have come to its defense.
Gary Chouest of services vessel owner and builder Edison Chouest and Al Gonsoulin of helicopter service provider PHI wrote in early April, in a paid newspaper advertisement: "We hope our state and our citizens will come to realise that to pursue BP with a mentality that says BP must be persecuted and punished beyond a fair bar of responsibility will hurt the reputation of our state…”
There are also questions about BP’s ability to fund big payments in a low oil price environment. In 2010, after the spill, it sold off assets in order to finance clean-up related expenses and payments. The ability to make payments over time, a feature of the just announced $18.7bn deal, should at least not force distress sales, if the oil company decides to finance its payments through asset disposals. Nevertheless, there’s been a renewed round of analyst speculation on which BP assets might go to competitors in further sales, as oil prices again drifted down into the low $50/barrel region, basis WTI- which has sold off sharply in recent weeks.
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