British oil giant BP has agreed to pay the U.S. government $4.5 billion in installments over a period of five years for the 2010 oil spill in the Gulf of Mexico, the oil giant announced in a press release.
The cost of BP's spill far surpassed the Exxon Valdez spill off Alaska in 1989. Exxon ultimately settled with the U.S. government for $1 billion, which would be about $1.8 billion today.
Under the terms of the agreement, BP agreed to plead guilty to 11 felony counts of misconduct or neglect of ships officers relating to the loss of 11 lives on Deepwater Horizon.
Two men who worked for BP during the disaster have been charged with manslaughter and a third with lying to federal investigators, according to indictments made public Thursday.
A federal indictment claims BP well site leaders Robert Kaluza and Donald Vidrine acted negligently in their supervision of key safety tests performed on the Deepwater Horizon drilling rig. The indictment says Kaluza and Vidrine failed to phone engineers onshore to alert them of problems in the drilling operation.
Another indictment charges David Rainey, who was BP's vice president of exploration for the Gulf of Mexico, on charges of obstruction of Congress and false statements.
The largest previous corporate criminal penalty assessed by the Department of Justice was a $1.2 billion fine imposed on drug maker Pfizer in 2009.
The statement released by the oil giant said part of the resolution of criminal claims will be $4 billion, including $1.256 billion in criminal fines, in installments over a period of five years.
"We believe this resolution is in the best interest of BP and its shareholders," said Carl-Henric Svanberg, BP's chairman said in the statement. "It removes two significant legal risks and allows us to vigorously defend the company against the remaining civil claims."
The oil giant also said it has also agreed to a term of five years' probation.
In a statement earlier Thursday, BP said the proposed settlement would not include civil claims under the Clean Water Act and other legislation, pending private civil claims and state claims for economic loss.
The Deepwater Horizon rig, 50 miles off the Louisiana coast, sank after the April 2010 explosion. The well on the sea floor spewed an estimated 206 million gallons of crude oil, soiling sensitive tidal estuaries and beaches, killing wildlife and shutting vast areas of the Gulf to commercial fishing.
The spill exposed lax government oversight and led to a temporary ban on deepwater drilling while officials and the oil industry studied the risks, worked to make it safer and developed better disaster plans.
Under the terms of the plea agreement, BP agreed to take additional actions to further enhance drilling safety in the Gulf of Mexico.
BP's environmentally friendly image was tarnished, and independent gas station owners who fly the BP flag claimed they lost business from customers who were upset over the spill. BP chief executive Tony Hayward stepped down after the company's repeated gaffes, including his statement at the height of the crisis: "I'd like my life back."
The grandmother of one man killed in the blast said Thursday that somebody needs to be held accountable, even if it doesn't end her family's pain.
"It just bothers me so bad when I see the commercials on TV and they brag about how the Gulf is back, but they never say anything about the 11 lives that were lost," said Nelda Winslette, whose grandson Adam Weise was killed. "They want us to forget about it, but they don't know what they've done to the families that lost someone."
The government and plaintiffs' attorneys also sued Transocean Ltd., the Deepwater Horizon rig's owner, and cement contractor Halliburton, but a string of pretrial rulings by a federal judge undermined BP's legal strategy to pin blame on them.
At the time of the explosion, the Deepwater Horizon was drilling into BP's Macondo well. The rig sank two days later.
After several attempts failed, engineers finally were successful in capping the well on July 15, 2010, halting the flow of oil into the Gulf of Mexico after more than 85 days.
As people all over the world watched a live spill camera on the Internet and television, the Obama administration dealt with a political headache, in part because the government grossly underestimated how much crude was spilling into the Gulf.
U.S. District Judge Carl Barbier in New Orleans was assigned to oversee tens of thousands of court claims spawned by the explosion. A trial date was set, but Barbier postponed it so BP could hammer out a deal with attorneys for Gulf Coast shrimpers, commercial fishermen, charter captains, property owners, environmental groups, restaurants, hotels and others who claim they suffered economic losses. Relatives of workers killed in the blast also sued.
Barbier gave his preliminary approval to that proposed settlement in May and scheduled a January trial for the remaining claims, including those by the federal government and Gulf states.
In a pretrial court filing, the Justice Department said it would argue that BP's actions and decisions leading up to the deadly blowout amounted to gross negligence.
"We do not use words like `gross negligence' and `willful misconduct' lightly," a Justice Department attorney wrote. "But the fact remains that people died, many suffered injuries to their livelihood, and the Gulf's complex ecosystem was harmed as a result of BP and Transocean's bad acts or omissions."
One of Barbier's rulings possibly insulates Transocean and Halliburton from billions of dollars in liability. Barbier said Transocean and Halliburton weren't obligated to pay for many pollution claims because of contracts they signed with BP.
The Justice Department opened a criminal investigation of the spill. The only person who had faced charges is former BP engineer Kurt Mix, who was arrested in Texas in April on obstruction of justice charges. Mix is accused of deleting text messages about the company's response to the spill, not what happened before the explosion.
The companies also sued each other, although some of those cases were settled last year. BP has sued Transocean for at least $40 billion in damages.
There are still other claims against BP from financial institutions, casinos and racetracks, insurance companies, local governments and losses caused by a government-imposed moratorium on drilling after the spill.
None of those are covered by BP's proposed settlement with the private lawyers.
A series of government investigations have spread blame for the disaster.
In January 2011, a presidential commission found that the spill was caused by time-saving, cost-cutting decisions by BP, Halliburton and Transocean that created unacceptable risk. The panel didn't point blame at any one individual, concluding the mistakes were caused by systemic problems.
In September 2011, however, a team of Coast Guard officials and federal regulators issued a report that concluded BP bears ultimate responsibility for the spill. The report found BP violated federal regulations, ignored crucial warnings and made bad decisions during the cementing of the well a mile beneath the Gulf of Mexico.
BP has repeatedly said it accepts some responsibility for the spill and will pay what it owes, while urging other companies to pay their share.
BP waived a $75 million cap on its liability for certain economic damage claims under the 1990 Oil Pollution Act, though it denied any gross negligence.