The Obama Administration has reached a final settlement with BP in the amount of $20.8 billion over the oil giant's culpability in the 2010 Deepwater Horizon spill.
According to the Wall Street Journal, the Justice Department was close to reaching a BP settlement deal last July. At that time, BP had conceded to pay out $18.7 billion, while the Justice Department wanted $20 billion.
Although the final figure of $20.8 billion is higher than either the government or BP's numbers from the tentative settlement, it appears to be a matter of accounting, rather than a disagreement of how much BP will actually pay.
The Wall Street Journal reports that the government figure includes money that BP had already paid out prior to the conclusion of the deal, leading to the discrepancy in numbers.
According to the New York Times, BP Senior Vice President Geoff Morrell confirmed that the difference between the July settlement amount and the final amount was a matter of accounting. He also said that the settlement provides BP with "certainty with respect to its financial obligations."
While $20.8 billion is a tremendous amount of money, the Wall Street Journal reports that BP has actually made provisions to pay out much more than that. SEC filings show that the oil giant had "taken a cumulative pretax charge of $54.6 billion since the explosion to settle the myriad claims against it from the government, shareholders and other companies."
Whether the settlement was $18.7 billion or $20.7 billion, the New York Times reports that this is the single largest environmental settlement in the history of the United States. For that matter, it's the biggest civil settlement of any kind.
As large as the $20.8 billion settlement figure seems, it could have actually been much larger.
Gina McCarthy, an administrator with the Environmental Protection Agency, told the New York Times that the settlement works out to about $1,725 per barrel of oil dumped into the Gulf of Mexico during the Deepwater Horizon spill, while a judge could have awarded a maximum of $4,300 per barrel had it gone to trial.
The BP settlement concludes a lawsuit filed in 2010 in the wake of the Deepwater Horizon oil spill, and it covers a number of different bases. According to the New York Times, the settlement has provisions for civil claims made under the Clean Water Act, natural resource damages under the Oil Pollution act, and economic damage claims.
As part of the settlement, BP will pay a total of $4.9 billion to the Gulf states of Alabama, Florida, Louisiana and Texas, and a further $1 billion to local governments, to cover economic damages in those areas.
This settlement provides BP a way forward in paying off damages from the Deepwater Horizon spill, and McCarthy, speaking to the Wall Street Journal, said that the government would now be able to lift the suspension on doing business with BP.
McCarthy also pointed out that, in addition to economic damages paid by BP, money from the settlement will be used to restore the damaged environment along the Gulf Coast.
"Justice is not about dumping a pile of money and walking away," McCarthy told the Wall Street Journal.
Although BP now has a solid figure to show shareholders, and plans to pay the amount, the Wall Street Journal reports that the company is still on the hook for a number of related civil suits. In a securities fraud trial set to begin early next year, investors allege that they lost money due to BP's incorrect estimates regarding the amount of oil dumped into the Gulf during the Deepwater Horizon spill.
What do you think about BP paying out the largest environmental settlement in the history of the United States to the tune of $20.8 billion?
[Photos by Chip Somodevilla/US Coast Guard; Joe Raedle/Getty Images News]