BP reaches $7.8B settlement over Gulf spill claims

BP agreed late Friday to settle lawsuits brought by more than 100,000 fishermen who lost work, cleanup workers who got sick and others who claimed harm from the oil giant's 2010 Gulf of Mexico disaster, the worst offshore oil spill in the nation's history.

The momentous settlement will have no cap to compensate the plaintiffs, though BP PLC estimated it would have to pay out about $7.8 billion, making it one of the largest class-action settlements ever. After the Exxon Valdez disaster in 1989, the company ultimately settled with the U.S. government for $1 billion, which would be about $1.8 billion today.

BP still has to resolve claims by the U.S. government, Gulf states and its partners in the doomed Deepwater Horizon project, in which pressure from a well more than a kilometre below the ocean's surface blew up a massive drilling rig, killing 11 men and spewing oil into the sea for nearly three months. That could add billions of more to its tab.

BP said it expects the money to come from the $20 billion compensation fund that it previously set out. According to the Deepwater Horizon Oil Spill Trust, current total trust assets are approximately $9.5 billion.

The spill exposed oil industry failings, forced BP chief executive Tony Hayward to step down after his repeated gaffes and led to new lexicon in American vocabulary as crews used innovative attempts to plug the spewing well, such as the top kill and the junk shot.

Environmental damage

The spill soiled sensitive tidal estuaries and beaches, killing wildlife and shutting vast areas of the Gulf to commercial fishing. After several attempts to cap the well failed, engineers finally were successful on July 15, halting the flow of oil into the Gulf of Mexico after more than 85 days.

The main targets of litigation resulting from the explosion and spill were BP, Transocean, Halliburton and Cameron International, maker of the well's failed blowout preventer. BP, the majority owner of the well that blew out, was leasing the rig from Transocean.

The Justice Department sued some of the companies involved in the ill-fated drilling project, seeking to recover billions of dollars for economic and environmental damage. The department opened a separate criminal investigation, but that probe hasn't resulted in any charges.

The companies also sued each other, although some of those cases were settled last year. In one of the pending lawsuits, BP has sued Transocean for at least $40 billion in damages.

Trial preparations produced a staggering 72 million pages of documents and included depositions of more than 300 witnesses. The trial also is designed to determine whether Transocean can limit what it pays those making claims under maritime law.

Trial postponed again

As a result of the settlement that will be filed with the court for approval, the trial that was scheduled to begin Monday has been postponed for a second time. No new date was immediately set.

A series of government investigations have spread blame for the disaster.

In January 2011, a presidential commission found that the spill was caused by time-saving and money-saving decisions by BP, Halliburton and Transocean that created unacceptable risk. But the panel also concluded that the mistakes were the result of systemic problems, not necessarily the fault of any one individual.

In September 2011, however, a team of Coast Guard officials and federal regulators issued a report that concluded BP bears ultimate responsibility for the spill. The report found BP violated federal regulations, ignored crucial warnings and made bad decisions during the cementing of the well more than a kilometre beneath the Gulf of Mexico.

BP has repeatedly said it accepts some responsibility for the spill and will pay what it owes, while urging other companies to pay their share.

BP established a $20 billion claims fund to resolve many claims out of court. As of Jan. 17, the Gulf Coast Claims Facility has paid out nearly $6 billion from the fund to more than 569,000 individuals and businesses.

BP waived a $75 million cap on its liability for certain economic damage claims under the 1990 Oil Pollution Act, though it denied any gross negligence.