The federal government and the Gulf Coast states have reached a tentative deal with the British oil company BP for it to pay about $18.7 billion, the largest environmental settlement in American history, to compensate for damages from the 2010 Deepwater Horizon oil spill, federal, state and company officials said Thursday.

An American BP subsidiary, BP Exploration and Production, will pay at least $7.1 billion, and possibly more, to the federal government and the states of Louisiana, Alabama, Mississippi, Texas and Florida, for damage to natural resources; $5.5 billion in penalties to the federal government for violation of the Clean Water Act; $4.9 billion to the states to compensate for harm to their economies; and up to $1 billion to more than 400 local governments.

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“This is a landmark settlement,” Gov. Robert Bentley of Alabama said at a news conference in Montgomery. “It is designed to compensate the state for all the damages, both environmental and economic.

Why BP Is Paying $18.7 Billion
Background on the 2010 Deepwater Horizon oil spill and the largest environmental settlement in American history.
The largest sums of the settlement would be paid out over 15 to 18 years, beginning a year after the settlement is finalized in federal court. BP put the value of the settlement at $18.7 billion, and the states gave similar figures; the Justice Department said the total value of the settlement could top $20 billion.

“If approved by the court, this settlement would be the largest settlement with a single entity in American history,” Attorney General Loretta E. Lynch said in a statement. “It would help repair the damage done to the Gulf economy, fisheries, wetlands and wildlife; and it would bring lasting benefits to the Gulf region for generations to come.”

BP had already agreed to pay more than $4 billion in criminal fines in a plea agreement over the spill. The company had also reported spending $14 billion in a three-month effort to contain the spill, which left much of the American public spellbound, as news channels broadcast images of the oil escaping the underwater well hour after hour, and of tar fouling Gulf Coast beaches.

In all, the company said it will incur more than $40 billion in costs related to the spill.The Deepwater Horizon rig, leased by BP and positioned less than 50 miles southeast of the tip of Louisiana, exploded and caught fire on April 20, 2010, killing 11 workers, and then sank. Oil continued to gush from the ruptured well on the seabed until it was capped in July.

Over the course of a two-year trial in New Orleans, the Justice Department had argued that under the Clean Water Act, BP should pay the maximum federal penalty of $13.7 billion, or $4,300 for every barrel of oil spilled, while BP had only set aside about a quarter of that amount for fines in the civil trial.

Testimony in the final phase of the federal government’s civil suit ended in February, and both sides had been awaiting a decision as settlement negotiations continued. The separate lawsuits filed by the states were scheduled to begin going to trial next year.

In deciding to settle the cases, BP’s board “has balanced the risks, timing and consequences associated with many years of litigation against its wish for the company to be able to set a clear course for the future,” Carl-Henric Svanberg, the company’s chairman, said in a statement.

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