A BP logo is reflected in a car window at a petrol station in London January (Reuters)
Officials in Florida, Alabama, Mississippi and Louisiana announced an $18.7 billion settlement with BP on Thursday that resolves years of litigation over the 2010 Gulf of Mexico oil spill, one of the worst environmental disasters in the U.S.
The settlement announcement comes as a federal judge was preparing to rule on how much the British oil giant owed in federal Clean Water Act penalties after millions of gallons (liters) of oil spewed into the Gulf. Individual states also were pursuing litigation. Most of those penalties were to be distributed among the states for environmental and economic restoration projects along the Gulf Coast.
"If approved by the court, this settlement would be the largest settlement with a single entity in American history; 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," U.S. Attorney General Loretta Lynch said in a statement.
The settlement money will be used to resolve the Clean Water Act penalties; resolve natural resources damage claims; settle economic claims; and resolve economic damage claims of local governments, according to an outline filed in federal court Thursday morning.
BP PLC chairman Carl-Henric Svanberg said the settlement reflected the company's commitment to restoring the Gulf of Mexico economically and environmentally, and provided the company with closure going forward.
In arguing against such a high penalty, BP has said its spill-related costs already were expected to exceed $42 billion, even without the Clean Water Act fine. It's unclear how much BP will end up paying under a 2012 settlement with individuals and businesses claiming spill-related losses.
Costs incurred by BP so far include an estimated $14 billion for response and cleanup and $4.5 billion in penalties announced after a settlement of a criminal case with the government.
In 2012, BP reached the settlement with plaintiff's lawyers over economic and property damage claims arising from the spill. In its first-quarter earnings report for 2015, BP said it could estimate at least a $10.3 billion cost. But it also stressed that the cost could be higher, depending on how many legitimate claims were filed by a recently passed deadline.
Earlier this year, a federal judge in New Orleans concluded the third phase of a civil trial pitting BP against the federal government. He had already made two key rulings: that BP acted with "gross negligence" in the rig explosion that resulted in the spill; and that 3.19 million barrels of oil spewed into the Gulf as a result.
BP had appealed both those rulings, which set the stage for the possible multibillion-dollar Clean Water Act penalty.