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BP reaches $7.8-bn deal with victims of oil spill
|March 5, 2012, 3:00 pm|
Originally posted by Bloomberg - March 5, 2012
BP Plc said it had reached a $7.8-billion settlement with businesses and individuals over the 2010 Deepwater Horizon oil rig disaster, removing one of three major litigation fronts facing the company over the biggest offshore spill in US history.
BP said yesterday in a statement that the settlement will be paid out of a $20 billion trust set up to compensate spill victims. Lawyers for the plaintiffs said in a separate statement that settlement will resolve most private claims for economic loss, property damage and medical injuries. Plaintiffs lawyers said there wasn’t a cap on the total damages BP has to pay.
“This settlement will provide a full measure of compensation to hundreds of thousands,” Stephen J Herman and James P Roy, the plaintiffs’ co-liaison counsel, said in their statement. “It does the greatest amount of good for the greatest number of people.”
US District Judge Carl Barbier in New Orleans yesterday ordered the adjournment of a trial scheduled to start March 5 to determine which companies were liable for the explosion aboard Transocean Ltd’s Deepwater Horizon rig off the coast of Louisiana and the resulting spill.
The proposed settlement terms will be submitted to the court for approval, the judge said. Barbier said in his order that he will schedule a status conference with lawyers to discuss issues raised by the settlement and set a new trial date.
If “definitive and fully documented agreements” aren’t reached within 45 days, either side has the right to terminate the proposed settlement, according to BP’s statement. The settlement will allow victims who aren’t satisfied with the deal to “opt out,” according to BP.
BP said in its statement that the proposed settlement won’t increase the $37.2 billion charge it previously recorded in its financial statements for spill costs. That figure includes the $20 billion BP has set aside for the trust fund, which will be used to pay spill damage claims and medical injury claims as well as “state and local government claims, state and local response costs, natural resources damages and related claims,” BP said.
The proposed settlement, costing BP an estimated $7.8 billion in addition to those amounts, includes $2.3 billion earmarked for economic losses related to the seafood industry in the Gulf of Mexico, the company said.
The proposed settlement, according to BP, doesn’t include claims against the London-based company by the US justice department for Clean Water Act violations or natural resource damages under the Oil Pollution Act.
The settlement also “excludes certain other claims against BP, such as securities and shareholder claims” pending in separate litigation consolidated in federal court in Houston.
The agreement will provide for a transition from the Gulf Coast Claims Facility trust, through which BP has paid about $6.1 billion for more than 220,000 claims from individuals and businesses, the company said.
BP was in talks with lawyers for the spill victims over a $14 billion proposal to be funded with money set aside for out-of-court settlements, three people familiar with the matter previously said. Under that plan, BP would close the trust and shift the remaining funds to plaintiffs, said the people, who declined to be identified because they weren’t authorised to speak publicly.
On Feb. 26, the day before trial in the case was to begin, Barbier delayed the case by a week so settlement talks could continue.
BP has also been in settlement talks with the federal government and the partner companies that also face liability for the spill, people familiar with those discussions have said.
The U.S. Clean Water Act lets the U.S. seek fines of as much as $1,100 for each barrel of oil spilled as a result of simple negligence, often described as a failure to exercise ordinary care. The maximum increases to $4,300 a barrel for gross negligence, or a conscious act or omission, leaving BP liable for as much as $17.6 billion in fines.
BP set aside $3.5 billion to pay Clean Water Act fines based on its own lower estimate of barrels spilled and no finding of gross negligence.
U.S. Attorney General Eric Holder said Feb. 28 that the U.S. has a “strong” case over liability for the explosion aboard the Deepwater Horizon.
“We are prepared to go to trial, we were ready to go to trial yesterday,” Holder said during testimony before a U.S. House Appropriations subcommittee in Washington.
Barbier, who will preside over any trial, would decide whether BP can demand other companies involved in the spill pick up some of the estimated $26 billion in costs spawned by the destruction of the Deepwater Horizon.
“Delays or deals made by other players do not change the facts of this case and we are fully prepared to argue the merits of our case based on those facts,” Lou Colasuonno, a Transocean spokesman, said yesterday in an e-mailed statement about the settlement.
BP’s trust was set up to make emergency and other types of payments to spill victims under the U.S. Oil Pollution Act to speed up assistance and cut down on the number of claims filed in court.
While lawyers for plaintiffs whose cases have been consolidated before Barbier proposed the settlement, attorneys for other spill victims may oppose it.
Brent Coon, a Houston-based lawyer representing spill victims both in federal and state courts, said in a Feb. 27 interview that he worried the $14 billion remaining in BP’s trust fund wouldn’t provide enough compensation for those harmed in the disaster.
Plaintiffs’ lawyers and the companies still haven’t been able to pin down the total number of claims tied to the spill because filing deadlines don’t expire for a year, he said.
Claims May ‘Double’
Another problem with the settlement proposal is lawyers for the steering committee don’t represent the majority of victims in the case, Coon said, which he said raises questions about their ability to act in the best interests of all claimants.
“A very small minority of lawyers are negotiating a deal that leaves them in control of the purse strings and let’s them dole it out,” he said. “I know a number of lawyers who are extraordinarily hostile to that idea.”
BP agreed in October to a $4 billion settlement with Anadarko Petroleum Corp. (APC), which owned a 25 percent stake in the Macondo well. It also agreed to drop claims against drilling fluid provider M-I Swaco, a unit of Houston-based Schlumberger Ltd. (SLB)