Transocean Paying $1.4 Billion Deepwater Horizon Settlement
The company announced Jan. 3 it has reached agreement with the Justice Department to resolve civil and potential criminal claims.
Transocean Ltd., which owned the Deepwater Horizon drilling rig that sank in the Gulf of Mexico following an April 20, 2010, explosion, announced Jan. 3 it has reached agreement with the Justice Department to settle civil and potential criminal claims. Eleven workers died in the explosion, which started a major oil spill into the gulf.
A Transocean subsidiary has agreed to plead guilty to one misdemeanor violation of the Clean Water Act for negligent discharge of oil into the Gulf of Mexico and pay $1.4 billion in fines, recoveries, and penalties, excluding interest, the company announced, saying the amount will be paid over a period of five years using cash on hand and cash flow from operations. At Sept. 30, 2012, Transocean had accrued an estimated loss contingency of $1.5 billion associated with claims made by the department.
"These important agreements, which the company believes to be in the best interest of its shareholders and employees, remove much of the uncertainty associated with the accident. This is a positive step forward, but it is also a time to reflect on the 11 men who lost their lives aboard the Deepwater Horizon. Their families continue to be in the thoughts and prayers of all of us at Transocean," its posted statement said.
Within 60 days after the agreement receives federal court approval, the company will pay a $100 million fine, and the subsidiary will be subject to a statutory-maximum term of five years of probation. Transocean also will pay $150 million to the National Academy of Sciencesover a five-year period and $150 million to the National Fish and Wildlife Foundation over a three-year period. The money paid to NAS will be for the purposes of oil spill prevention and response in the Gulf of Mexico, while money paid to the foundation will be go to natural resource restoration projects and coastal habitat restoration, including restoration of the barrier islands off the coast of Louisiana and diversion projects on the Mississippi and Atchafalaya Rivers.
Another $1 billion in Clean Water Act civil penalties over a three-year period are included, and Transocean has agreed to consult with the United States in preparing a performance plan for improvements to prevent spills -- and this plan must be submitted for government approval within 120 days after this agreement takes effect. Potential claims associated with the Natural Resources Damage Assessment process are excluded from the agreement, but the court previously held Transocean is not liable under the Oil Pollution Act for damages caused by subsurface discharge from the Macondo well. If the ruling is upheld on appeal, Transocean's NRDA liability would be limited to damages arising from the above-surface discharge, according to the statement.
The payment schedule is this:
·2013 - payments totaling $560 million
·2014 - payments totaling $460 million
·2015 - payments totaling $260 million
·2016 - payments totaling $60 million
·2017 - payments totaling $60 million
Civil penalties will bear interest from the date the consent decree is lodged with the court.