In the largest settlement in US history, BP Plc (NYSE: BP) has settled criminal charges with the US Department of Justice in relation to the 2010 Deepwater Horizon incident that killed 11 workers and sent millions of gallons of oil spewing into the Gulf of Mexico.
The $4 billion deal resolves the federal criminal and securities claims against London-based BP as the company agreed to plead guilty to 11 felony counts of misconduct or neglect that resulted in 11 deaths; one misdemeanor count under the Clean Water Act; one misdemeanor count under the Migratory Bird Treaty Act; and one felony count of obstruction of Congress.
In a statement, BP noted that 13 of the 14 criminal charges are based on the negligent misinterpretation of the negative pressure test conducted on board the Deepwater Horizon.
As a result of the settlement, BP will pay a large portion of its $4 billion fine to various government environmental agencies including the National Fish & Wildlife Foundation and the National Academy of Sciences, including $1.25 billion in criminal fines, in installments over a period of five years. The company has also agreed to a probation term of five years.
“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,” said Bob Dudley, BP’s group chief executive, in 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 US government further reflects, we have accepted responsibility for our actions.”
Peter Hutton, an analyst with RBC Capital Markets, saw the settlement action as favorable for the company.
“In our view, this is a positive for a number of reasons, including that $4 billion was in the low- to mid-range of expectations,” said Hutton. In addition, BP was given four years to pay the $4 billion in installments.
He added that the settlement is an indication of pragmatism on the part of the US government. Liabilities are yet to be awarded (or settled) under the Clean Water Act with an estimated range of $6 billion to $21 billion.
“Nothing in this [settlement] suggests it is likely to be at the top end of this range and indeed could be more mid-range,” Hutton concluded.