$7.8bn payout will compensate
thousands of individuals and comes ahead of trial due to begin on Monday
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| Fire boat response crews spray water on the burning remnants of BP's Deepwater Horizon oil rig in April 2010. |
The settlement, announced by Judge Carl Barbier, was reached just ahead of Monday's trial in a New Orleans court.
The trial, already delayed by a week to allow extra time for negotiations, has been postponed again.
With one major settlement achieved, BP will probably redouble its efforts to reach a deal with the federal government over fines related to the spill.
In a statement late on Friday night, the oil company said it would use the remainder of the $20bn compensation fund raised in the summer of 2010 to settle claims with tens of thousands of shrimp boat captains, condo owners and others who suffered losses in the spill. The company said it had already paid out about $8bn from the fund.
The oil company said the $7.8bn would also include $2.3bn for the Gulf seafood industry.
"From the beginning, BP stepped up to meet our obligations to the communities in the Gulf Coast region and we've worked hard to deliver on that commitment for nearly two years," said Bob Dudley, the BP chief executive. "The proposed settlement represents significant progress toward resolving issues from the Deepwater Horizon accident and contributing further to economic and environmental restoration efforts along the Gulf Coast."
Eleven men were killed in the 20 April 2010 blowout on the Deepwater Horizon. By the time BP regained control of its well 87 days later, the Gulf was fouled by some 4.9m barrels of crude, destroying shrimp and oyster harvests and the tourist season.
It was America's worst oil spill. and the civil trial of BP and the other companies involved on the Deepwater Horizon had been expected to be one of the biggest and most complex legal proceedings in modern history.
Hundreds of lawyers for all parties were involved in preparing for the trial – and in parallel negotiations to try to get a settlement. There were 340 lawyers from 90 different firms working on the plaintiffs' side alone.
The deal between BP and more than 120,000 victims of the spill – from shrimp boat captains to sales teams at time-share condos, restaurateurs and wedding planners – settles what is arguably the most complicated part of the legal proceedings.
But it will not be universally welcomed in the Gulf, where there is a strong undercurrent of opinion that wants to see BP held to account in court in addition to offering financial compensation.
Dean Blanchard, a leading shrimp producer from Grand Isle, Louisiana, before the spill, was adamant: payment would not be enough.
"I want my day in court," he said. "If they can get off with just paying the money – well, they've got plenty of money, they are not really going to learn a lesson.
"I'd like to make sure this never happens again. Somebody has got to hold BP's feet to the fire. They have just gotten away with throwing money at problems, but that doesnt get rid of the problems."
Friday night's deal will also not resolve all of BP's legal challenges.
The federal government, and the state governments of Louisiana and Alabama, are also pursuing claims, although the federal government is believed to be actively negotiating with BP to reach a deal over civilian fines for environmental damage done during the spill. If BP is found guilty of gross negligence those fines could reach $17bn.
BP is in a legal battle with the other companies that were involved in the runaway well: Transocean, which owned the oil rig, and Halliburton, which cemented the well. Those legal brawls, over the share of the costs of covering those damages, could continue even after the claims have settled.
"Delays or deals made by other players do not change the facts of this case and we are fully prepared to argue the merits of our case based on those facts," a spokesman for Transocean said on Friday night.