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NEW ORLEANS -- Two and half years after the worst oil spill in U.S. history, BP plc has agreed to pay a total of $4.5 billion in penalties and plead guilty to felony misconduct in the Deepwater Horizon disaster.
In April 2010 the Deepwater Horizon platform exploded in the Gulf of Mexico, killing 11 workers. The money penalties include $4 billion in a settlement with the U.S. Department of Justice and $525 million with the U.S. Securities and Exchange Commission (SEC). The settlement includes a criminal fine of $1.256 billion, the largest such levy in U.S. history, the company said.
"All of us at BP deeply regret the tragic loss of life caused by the Deepwater Horizon accident as well as the impact of the spill on the Gulf coast region," said Bob Dudley, BP's group chief executive. "From the outset, we stepped up by responding to the spill, paying legitimate claims and funding restoration efforts in the Gulf. We apologize for our role in the accident, and as today's resolution with the U.S. government further reflects, we have accepted responsibility for our actions."
In eliminating the possibility of any further federal criminal charges against the company based on the accident, BP has taken another significant step forward in removing legal uncertainty and can now focus more fully on defending itself against all remaining civil claims, the company said in a statement.
"We believe this resolution is in the best interest of BP and its shareholders," said Carl-Henric Svanberg, BP's chairman. "It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims."
As part of the resolution, BP has agreed to plead guilty to 11 felony counts of misconduct or neglect of ships officers relating to the death of the 11 workers; one misdemeanor count under the Clean Water Act; one misdemeanor count under the Migratory Bird Treaty Act; and one felony count of obstruction of Congress.
This resolution is subject to U.S. federal court approval, the company said in a statement.
According to the company, 13 of the 14 criminal charges pertain to the accident itself and are based on the negligent misinterpretation of the negative pressure test conducted on board the Deepwater Horizon. BP acknowledged this misinterpretation more than two years ago when it released its internal investigation report. Today's agreement is consistent with BP's position in the ongoing civil litigation that this was an accident resulting from multiple causes, involving multiple parties, as found by other official investigations.
The remaining criminal count pertains to two BP communications made to a member of Congress during the spill response about flow rate estimates. As part of its resolution of criminal claims with the U.S. government, BP will pay $4 billion, including $1.256 billion in criminal fines, in installments over a period of five years. BP has also agreed to a term of five years' probation.
Under the resolution with the U.S. Department of Justice, a total of $2.394 billion will be paid to the National Fish & Wildlife Foundation over a period of five years. In addition, $350 million will be paid to the National Academy of Sciences, also over a period of five years.
With the plea agreement, BP has also agreed to take additional actions, enforceable by the court, to further enhance the safety of drilling operations in the Gulf of Mexico. These requirements relate to BP's risk management processes, such as third-party auditing and verification, training, and well control equipment and processes such as blowout preventers and cementing. In addition, BP has agreed to several initiatives with academia and regulators to develop new technologies related to deepwater drilling safety, the company said.
BP has also agreed to pay a civil penalty of $525 million to resolve the SEC's Deepwater Horizon-related claims against the company. The SEC's claims are premised on oil flow rate estimates contained in three reports provided by BP to the SEC during a one-week period (on April 29 and 30 and May 4, 2010), within the first 14 days after the accident. This resolution is subject to U.S. federal court approval.
"Since the spill, we have worked hard to rebuild confidence in the company," Dudley said. "We take seriously not only our commitment to safety and operational excellence but also our communications with stakeholders, including the public, the government and our investors."
The penalties are not tax deductible, nor can they be used to offset any future civil penalties. Speaking at a press conference in New Orleans this afternoon, U.S. Attorney General Eric Holder said the government's work is "far from over."
"Today's resolution does not mark the end of efforts," he said, adding that the criminal investigation remains ongoing. There is also a separate civil action pending in federal court in New Orleans, which is set to begin in February. Holder noted that the government intends to prove BP was "grossly negligent in the oil spill."
BP's U.S. shares gained about 0.3 percent on Thursday while its London-traded shares were flat. Wall Street analysts were encouraged that the plea deal could resolve a significant share of the liability BP faces. But it is not a "global" deal to resolve all outstanding liability, according to Reuters.