BP Oil Spill Lawsuit: Criminal, Civil, and Private Settlements

The BP oil spill lawsuit is the sprawling federal litigation that followed the April 20, 2010, Deepwater Horizon blowout in the Gulf of Mexico. Thousands of individual, business, and government claims were consolidated before a single judge in New Orleans, who found BP grossly negligent. The company pleaded guilty to 14 criminal counts, agreed to a $20.8 billion civil settlement with the federal government and five Gulf states in 2016, and has now provisioned more than $69 billion in total costs.¹

What the Lawsuit Covered

The blowout on BP’s Macondo well killed 11 workers and released oil into the Gulf until the well was capped on July 15, 2010, and sealed on September 19, 2010. The volume of oil discharged was itself contested in court. The government estimated 4.2 million barrels, BP argued 2.45 million, and Judge Carl J. Barbier set the legally operative figure at 3.19 million barrels, or roughly 134 million gallons.²³

Thousands of suits were consolidated into MDL 2179, In re: Oil Spill by the Oil Rig “Deepwater Horizon,” in the U.S. District Court for the Eastern District of Louisiana, with Judge Barbier presiding. The case swept in economic loss claims, medical injury claims, and Clean Water Act civil penalty claims brought by the federal government.⁴⁵

Most private claims and government cleanup costs rested on the Oil Pollution Act of 1990. Under OPA, liability is strict: claimants did not have to prove negligence. Cleanup costs against offshore facilities carry unlimited liability, and while other damages are nominally capped at $75 million, that cap falls away in cases of gross negligence, willful misconduct, or a violation of federal safety requirements that proximately caused the spill.⁶

The Gross Negligence Finding

In September 2014, at the end of Phase 1 of the civil trial, Judge Barbier ruled that BP acted with “gross negligence” and “willful misconduct.” Transocean and Halliburton were found ordinarily negligent. The court assigned 67% of the fault to BP, 30% to Transocean, and 3% to Halliburton.⁷⁸

That single finding drove the numbers. Under the Clean Water Act, a negligent discharge carries a maximum penalty of roughly $1,100 per barrel. Gross negligence raises the ceiling to about $4,300 per barrel. With millions of barrels at issue, the swing was tens of billions of dollars.⁸

Judge Barbier identified both a “single act” of gross negligence tied to a failed negative pressure test and “cumulative” gross negligence across multiple decisions, including drilling with minimal safety margins and misinterpreting critical test results. The court described BP’s conduct as “egregious enough that exemplary or punitive damages would be appropriate” but held that Fifth Circuit precedent barred punitive damages in the case.⁸

Phase 2, decided in January 2015, set the discharge volume at 3.19 million barrels. Phase 3, concluded in February 2015, weighed the statutory penalty factors. Before a final judicial penalty issued, the parties reached the sweeping settlement announced in October 2015 and approved on April 4, 2016.³

The $4 Billion Criminal Case

On January 29, 2013, BP Exploration and Production pleaded guilty to 14 criminal counts: 11 felony counts of manslaughter for the workers killed, one felony count of obstruction of Congress for providing misleading flow-rate data, and misdemeanor violations of the Clean Water Act and the Migratory Bird Treaty Act. BP admitted its well-site leaders acted negligently, ignored signs of well instability, and failed to prevent the blowout. It also admitted manipulating flow-rate estimates to understate the spill to Congress.⁹

The $4 billion criminal resolution was the largest in U.S. history at the time. About $2.4 billion was directed to Gulf Coast environmental restoration and $350 million to oil spill prevention research and training. BP received five years of probation and was required to retain independent monitors for process safety, auditing, and ethics. A separate $525 million payment to the Securities and Exchange Commission brought the criminal-related total to $4.5 billion.⁹¹⁰

The $20.8 Billion Civil Settlement

On April 4, 2016, Judge Barbier approved a $20.8 billion settlement between BP, the federal government, and the five Gulf states of Alabama, Florida, Louisiana, Mississippi, and Texas. It was the largest environmental damage settlement and the largest civil penalty ever assessed against a single company in the United States. The deal resolved civil and criminal penalty claims under the Clean Water Act and the Oil Pollution Act along with economic damage claims from the Gulf states and local governments.¹¹¹²

The settlement broke into four main pieces:

Clean Water Act penalties of $5.5 billion, payable over 15 years. Under the 2012 RESTORE Act, 80% of that amount ($4.4 billion) went to the Gulf Coast Ecosystem Restoration Trust Fund.¹¹
Natural resource damages of $8.1 billion under the Oil Pollution Act, payable over 15 years, up to $8.8 billion including adaptive management funds. Louisiana, which sustained the greatest damage, was allocated roughly $5 billion.¹²
State economic damages of $4.9 billion, payable over 18 years to the five Gulf states.¹
Local government claims of up to $1 billion, resolving claims from more than 400 local entities.¹

Private Claims: What Individuals and Businesses Got

The Gulf Coast Claims Facility

In 2010, under political pressure from the Obama administration, BP voluntarily established a $20 billion escrow fund. Kenneth Feinberg was appointed to run the Gulf Coast Claims Facility, which processed private and business claims. In its first six months the GCCF received roughly 500,000 claims, paid about 170,000, and distributed over $3.5 billion.¹³

The facility drew criticism from claimants who said the process was opaque and inconsistent, with similarly situated people receiving different amounts. Feinberg attributed much of that to variations in documentation, noting that roughly 80% of pending claims lacked sufficient proof. BP, though it funded the facility, criticized the GCCF for being too generous with final payment offers.¹³

The Economic and Property Damages Settlement

In March 2012, BP agreed to a class action settlement for economic losses and property damage. A court-supervised Deepwater Horizon Claims Center replaced the GCCF in June 2012, and Judge Barbier approved the settlement that December. Eligible claimants included individuals who lived, worked, or owned property in designated Gulf areas and businesses that operated in those regions. The settlement also created a seafood compensation fund.⁵

BP later tried to unwind the deal, arguing the claims administrator was approving payments to people and businesses that had suffered no actual harm and claiming it had made over $600 million in “illegitimate payments.”¹⁴ The Fifth Circuit and Judge Barbier’s court both upheld the administrator’s interpretation, and on December 8, 2014, the Supreme Court declined to hear BP’s appeal without comment.¹⁵ By early 2018, the economic and property damages settlement had delivered over $11.2 billion to claimants.¹⁶ The court-supervised claims program entered a formal wind-down phase in January 2021.⁴

The Medical Benefits Settlement

A separate medical benefits class action reached in May 2012 covered cleanup workers and residents of affected areas. It took effect on February 12, 2014, with a claim deadline one year later. Eligible claimants received a lump-sum payment for qualifying respiratory, dermal, and (for cleanup workers) heat-related conditions. When a claimant had multiple conditions, only the highest-qualifying one was paid.¹⁷

The settlement also established a 21-year periodic medical examination program, with physicians selected by BP, and a “back-end litigation option” for claimants who later developed spill-related conditions. Participants had to choose between pursuing workers’ compensation or suing BP; they could not do both.¹⁸

The Other Companies Named in the Case

BP was the operator, but three co-defendants played central roles and paid their own resolutions. Transocean owned and operated the rig, Halliburton was the cementing contractor, and Cameron International manufactured the failed blowout preventer.¹⁹

On January 3, 2013, Transocean agreed to pay a $1 billion Clean Water Act civil penalty and a $400 million criminal fine after pleading guilty. It also agreed to safety and spill response improvements.²⁰
Halliburton agreed to pay $1.1 billion to resolve private damages claims, covering BP-assigned claims along with property damage and commercial fishing claims.²¹
In December 2011, Cameron International settled with BP for $250 million, dropping all claims between the two companies. Government investigators had alleged the blowout preventer had a design flaw and was improperly maintained. The agreement was not an admission of liability by either party.²²²³

Within MDL 2179, Halliburton and Transocean also agreed to a combined $1.24 billion settlement to resolve punitive damages and BP-assigned claims, divided by a court-appointed neutral: $902 million to a “New Class” of claimants whose property was oiled or who worked in affected fishing and charter industries, and $338 million to an “Old Class” of prior settlement participants.²⁴

The Prosecutions of Individual Employees

The government also charged four BP employees. None served prison time. Rig supervisors Robert Kaluza and Donald Vidrine were originally indicted on 22 counts each, including manslaughter and seaman’s manslaughter. The seaman’s manslaughter counts were dismissed by the courts, and prosecutors dropped the remaining manslaughter charges in December 2015, saying they could “no longer meet the legal standard.”²⁵ Vidrine pleaded guilty to a misdemeanor Clean Water Act violation, and prosecutors recommended probation with no prison time.²⁶ Kaluza went to trial on the remaining Clean Water Act count and was acquitted on February 25, 2016, after less than two hours of deliberation.²⁷

Former BP executive David Rainey was charged with obstruction of Congress and lying to law enforcement for allegedly understating the spill rate. A jury found him not guilty in June 2015.²⁸ Engineer Kurt Mix was convicted in December 2013 of obstruction of justice for deleting text messages during a grand jury investigation, but the conviction was vacated for juror misconduct. Instead of a retrial, the government dropped the felony charges in November 2015. Mix pleaded to a misdemeanor computer fraud charge and received six months of probation and 60 hours of community service.²⁹

What the Case Has Cost BP

In June 2016, BP put its final estimate for total costs at $61.6 billion.¹² That figure has since risen. BP’s own disclosures now put provisioned costs at more than $69 billion, covering response and cleanup, economic and medical claims, criminal fines, the 2016 civil settlement, and ongoing restoration payments.¹

The main components include the $20.8 billion government settlement, $4 billion in criminal fines, $6.2 billion paid through the early Gulf Coast Claims Facility, an estimated $14.8 billion in court-supervised private claims, and $500 million for the Gulf of Mexico Research Initiative.¹² Payments continue on extended schedules. The $4.9 billion in state economic claims runs over 18 years, and the natural resource damage payments run 15 years from 2017.¹ As of 2022, Louisiana alone had received $2.13 billion from BP, with $1.4 billion committed to restoration projects.³⁰

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