On October 5, 2015, the United States, BP Exploration and Production Inc. (BP), Alabama, Florida, Louisiana, Mississippi and Texas lodged a Consent Decree with the District Court for the Eastern District of Louisiana to resolve claims for federal civil penalties and natural resource damages (NRDs) related to the Deepwater Horizon drilling unit / Macando Well oil spill in the Gulf of Mexico. If approved, this would be the largest natural resource damage settlement in U.S. history.
The terms of this settlement, including credit for the prior early payment towards NRDs, provide a possible template for resolving natural resource claims. A link to the Consent Decree, is here.
The United States sued BP in December 2010 under the Clean Water Act (CWA) and the Oil Pollution Act, seeking removal costs, penalties and NRDs related to discharges of hydrocarbons and other substances from the Macando Well into the Gulf of Mexico. The litigation was divided into three phases. In the first phase, the court found that the discharge of oil was the result of BP’s gross negligence and willful misconduct within the meaning of Section 311(b)(7)D) of the CWA. In the second phase, the court found that for purposes of calculating the maximum civil penalty under the CWA, 3.19 million barrels of oil discharged from the Macando Well into the Gulf of Mexico. The third phase of trial related to the United States’ penalty claims. On October 5, 2015, prior to the court issuing a decision on the third phase of trial, the parties lodged the proposed Consent Decree with the court.
Under the terms of the proposed Consent Decree, BP must pay $5.5 billion, plus interest, in civil penalties. 80 percent of the civil penalties will be allocated to environmental restoration, economic recovery and tourism promotion in Alabama, Florida, Louisiana, Mississippi and Texas, while the rest will be paid to the Oil Spill Liability Trust Fund to support responses to oil spills. BP must also pay $8.1 billion in NRDs, which includes $1 billion that BP already committed to pay under a previous agreement. The NRD funds will be used by federal and state trustee agencies to meet agreed upon restoration goals in the Gulf of Mexico area. The settlement also includes payment of $350 million in NRD assessment costs, up to $700 million to address currently unknown natural resource conditions, and $250 million to reimburse the United States for spill response and other costs. BP also reached a separate agreement to pay $5.9 billion to resolve economic damages claims brought by state and local governments.
In addition to the payments, as injunctive relief, the Consent Decree will require BP to publicly post certain safety and ethics related information, including certain annual reports it is required to submit to the government, compliance-related information and findings of deficiencies by auditors. BP’s parent companies must also guarantee that all payments required under the Consent Decree will be made.
The government parties are accepting comments on the proposed Consent Decree through December 4, 2015, after which they will determine whether to seek the court’s approval of the Consent Decree.