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Tentative Settlement in the Deepwater Horizon Case

pettit-davidThere was a tentative settlement last week in the Clean Water Act lawsuit that the US government brought against BP for the 2010 Deepwater Horizon oil spill. The settlement is tentative in the sense that the parties have agreed but the judge in the lawsuit has to agree as well. You can read the Justice Department and BP press releases about the settlement.

Here are the outlines of the deal. BP will pay a civil penalty of $5.5 billion for Clean Water Act violations paid over a 15 year period. 80 percent of this, or $4.4 billion, will go to the RESTORE Act. So, In addition to the $0.8 billion from the Transocean settlement, the Gulf Restoration Trust Fund (established by the RESTORE Act) will have $5.2 billion total to distribute, but not all at once. According to the Justice Department, the $5.5 billion to be paid by BP is the largest civil penalty in the history of environmental law. In addition, BP will pay $7.1 billion for natural resource damages, again paid over 15 year period. This is addition to the $1 billion that BP has already paid for “early restoration” projects. Another $0.7 billion will come from interest payments and additional charges, bringing the NRDA environmental restoration enterprise to $7.7 billion — a higher figure that the Clean Water Act penalties. Use of these funds will be subject to the decisions of the Natural Resources Trustee Council, not the RESTORE Council. Thus, the so-called NRDA money available will be more significant than the RESTORE money in terms of ecosystem restoration activities and there will be a greater role of federal agencies. From the settlement perspective, it is interesting to note that the NRDA claims were not yet in litigation; I am guessing that BP wanted a “global” deal that would put a cap on its liability for Clean Water Act and NRDA payments.

BP will also pay $5.9 billion to the 5 Gulf states for economic damages, including lost tax revenues. The US Government is not a party in that aspect of the settlement. I suspect that these funds will go to general revenues or to specific capital projects and programs in the state and not to address environmental or social issues relative to the Gulf.

Two odd things in the settlement have to do with the natural resource damages claims. First, the state and federal natural resource trustees never published a damage assessment that sets out their view of the damages incurred, the proposed restoration and the cost of restoration, and so we don’t know how the settlement numbers were reached or whether those numbers are fair or not. Second, there is a fixed “reopener” clause that limits BP’s future liability for currently-unknown natural resource damages to $232 million; from the natural resource trustees’ perspective, you want to have a reopener clause that is unlimited in amount. We have no idea how the $232 million figure was reached.

David Pettit
David Pettit is director of the Natural Resources Defense Council's Southern California air program in Santa Monica and is an experienced trial and appellate lawyer. Since joining NRDC in 2007, he has focused on curbing pollution in California by litigating against polluting industries and campaigning for clean, alternative energies and greener development in urban areas. David has litigated environmental cases in state and federal trial and appellate courts for many years in private practice and at NRDC, including major air pollution matters, offshore oil spills, groundwater pollution, habitat preservation, and natural resource damage assessment disputes. He has a bachelor of arts degree in philosophy and a law degree from UCLA.
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