The company had been committed to fighting the claims in court after negotiations fell apart in 2013. But falling oil prices and a federal judge’s recent rulings putting a potential $13.7 billion price tag on Clean Water Act violations helped motivate BP to change tactics in May, said the people, asking not to be identified because negotiations were private.
“BP was staring down a gun barrel and had to find some way to settle this,” said David Berg, a Houston trial lawyer who tracked the spill litigation but isn’t involved in it. “The total are staggering,” though BP was able to “hammer the government into a payout plan that stretched out over several years.”
The agreement, while preliminary, specifies the payments will be spaced out over as long as 18 years. A record $5.5 billion will cover federal penalties under the Clean Water Act, topping the previous high of $1 billion. Louisiana, Mississippi, Alabama, Florida and Texas will also receive payouts for harm from the disaster, which claimed 11 lives and caused the worst offshore spill in U.S. history.